<< <i> But what interests me the most from your data is the fact that those 30 stocks from 1991.....left without substitution.....have actually outpaced todays DOW index. In other words, had the DOW retained all 30 companies from 1991 to today, then the DOW would be at around 16,451 (5.64 x 2,917). That runs utterly against what I had believed to be a "stacked deck" in relation to the DOW's price over time with all the periodic substitution.
Now im just baffled. >>
The problem with the Dow (and the S&P 500, and other indices) is they 'buy high and sell low' in terms of adjusting the makeup of the index.
Comments
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But what interests me the most from your data is the fact that those 30 stocks from 1991.....left without substitution.....have actually outpaced todays DOW index. In other words, had the DOW retained all 30 companies from 1991 to today, then the DOW would be at around 16,451 (5.64 x 2,917). That runs utterly against what I had believed to be a "stacked deck" in relation to the DOW's price over time with all the periodic substitution.
Now im just baffled. >>
The problem with the Dow (and the S&P 500, and other indices) is they 'buy high and sell low' in terms of adjusting the makeup of the index.
John Mauldin posted some research about the original Dow components vs. the index, a couple of years ago. He has a chart showing several different results, based on price weighting, equal weighting, etc.
He posted a link to Dogs of the Dow - Dow Deletion Table as well.
Might be interesting to read it for further enlightenment. The most important thing I got out of it is the value of dividends
(Spoiler alert: without dividends, and adjusted for inflation, returns were 1.4% annually for 80 years, PRE-TAX!)
Sometimes that Dow replaces Chevron with Microsoft right before high tech (sic) busts and oil goes to $100.