Blog / Dissecting The Dow Jones Industrial Average: Half Empty Or Half Full?

Dissecting The Dow Jones Industrial Average: Half Empty Or Half Full?

Dow Jones Industrial Average

The Dow Jones Industrial Average is a leading index comprised of 30 stocks. Consequently, it has long been considered a great proxy for the stock market at large. However, as I stated many, many times: “it is a market of stocks and not a stock market.” Furthermore, many have asked me what I mean by that. The answer is simple, not all stocks are the same. Therefore, it makes more sense to evaluate the market based on the merits and relative valuations of the individual constituents that make it up. The beauty of the Dow Jones Industrial Average is it only contains 30 stocks.

Dow Jones 30
Dow Jones 30

The reason I present this video is because I have been asked several times in recent weeks – have you looked at the Dow Jones? While the answer is yes, but I might add, that I look at the Dow quite differently than many investors do. Instead of seeing the market as a whole, I see the individual constituents that make up the index. Therefore, instead of thinking in generalities, like the market is high or the market is low, I think in specifics. I might say ABC company in the Dow is very expensive, but XYZ is cheap and so on. I believe this is a much more rational and learned view than simply overgeneralizing.

In summary, with this video I show how easy it is to look at the overall market with more perception and depth when you have the proper tools. Knowledge is power, and the more you can know about the market, the safer and more profitable your portfolios can be.

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Disclosure: Long AAPL, AMGN, CAT, CSCO, CVX, IBM, INTC, JNJ, JPM, MCD, MMM, MRK, MSFT.

Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.