Comments on: How Each Stock Affects the Dow’s Performance http://allfinancialmatters.com/2008/10/27/how-each-stock-affects-the-dows-performance/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Fri, 25 May 2012 17:52:53 +0000 hourly 1 http://wordpress.org/?v= By: Gerard http://allfinancialmatters.com/2008/10/27/how-each-stock-affects-the-dows-performance/comment-page-1/#comment-374510 Gerard Wed, 29 Oct 2008 02:47:52 +0000 http://allfinancialmatters.com/?p=2906#comment-374510 Indices (and aggregates in general) are neither good nor bad inherently. As long as you recognise the intent behind them and pay attention to their limitation and the methodology behind their construction, then they tend to do their job... The problem always is that people don't take the time to pay attention to the details (myself included) and get into trouble as a result... Indices (and aggregates in general) are neither good nor bad inherently. As long as you recognise the intent behind them and pay attention to their limitation and the methodology behind their construction, then they tend to do their job… The problem always is that people don’t take the time to pay attention to the details (myself included) and get into trouble as a result…

]]> By: rbk http://allfinancialmatters.com/2008/10/27/how-each-stock-affects-the-dows-performance/comment-page-1/#comment-374437 rbk Tue, 28 Oct 2008 17:32:52 +0000 http://allfinancialmatters.com/?p=2906#comment-374437 Mike-- There may be other reasons but one is that people like to refer to the DJIA when they talk about where the market is moving, and it is not a great measure of that. The DJIA is 1) only 30 stocks-- a small sampling 2) not diversified among sectors 3) made up only of very large companies Basically between the small sample size and lack of diversification both by size and sector, it's just not a good index to follow for market trends. Others may have more input, but for this reason I pay a lot more attention to the S&P 500 for large cap stocks and one of several other indices for whole-market or mid- and small-caps. Mike–

There may be other reasons but one is that people like to refer to the DJIA when they talk about where the market is moving, and it is not a great measure of that. The DJIA is

1) only 30 stocks– a small sampling

2) not diversified among sectors

3) made up only of very large companies

Basically between the small sample size and lack of diversification both by size and sector, it’s just not a good index to follow for market trends.

Others may have more input, but for this reason I pay a lot more attention to the S&P 500 for large cap stocks and one of several other indices for whole-market or mid- and small-caps.

]]> By: Mike http://allfinancialmatters.com/2008/10/27/how-each-stock-affects-the-dows-performance/comment-page-1/#comment-374436 Mike Tue, 28 Oct 2008 17:11:36 +0000 http://allfinancialmatters.com/?p=2906#comment-374436 Cool post. Can someone explain to me how the Dow is a 'bad index'? Cool post.

Can someone explain to me how the Dow is a ‘bad index’?

]]> By: Andrew http://allfinancialmatters.com/2008/10/27/how-each-stock-affects-the-dows-performance/comment-page-1/#comment-374413 Andrew Tue, 28 Oct 2008 14:16:21 +0000 http://allfinancialmatters.com/?p=2906#comment-374413 I definitely agree that the Dow is build on poor math. However, historical charts of the Dow vs the S&P 500 are almost identical. So I don't think it's really that big a deal. I definitely agree that the Dow is build on poor math. However, historical charts of the Dow vs the S&P 500 are almost identical. So I don’t think it’s really that big a deal.

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