Indexes: Dow vs. S & P

[augam]

1% difference. Just doesn't seem right. Think the Dow needs an adjustment.

 

[Big_Hitter]

the dow is price-weighted, the s&P is market weighted

 

[Big_Hitter]

also, just for ishts and giggles, the value line index is geometrically weighted, which makes it impossible to create a portfolio that replicates it

 

[OldShooter]

Indices are a little like the blind men and the elephant. (https://americanliterature.com/author/james-baldwin/short-story/the-blind-men-and-the-elephant) Each of them describes the elephant in a different way and none is wrong.

Actually, I think the biggest problem with looking at index numbers is that they do not reflect total return. This can be a hugely distorting factor when comparing the total return of, for example, a fund to the change in an index value over the same period. I sometimes have trouble finding index total return numbers.

 

[mpeirce]

The DOW (really the DOW Industrial Average, there are the transportation and utility averages too) is outdated - it was easy to calculate back when it was created back in the 1800's. The S&P 500 or (better) total US market are more indicative of "the market".

I blame the Wall Street Journal for continuing to keep this outmoded indicator alive.

 

[donheff]

The DOW isn't an index. It's useless for anything other than answering "what's happening with the DOW?"

 

[Big_Hitter]

Actually, I think the biggest problem with looking at index numbers is that they do not reflect total return.

very true!

 

[Big_Hitter]

The DOW isn't an index.

last time I looked it was the price-weighted average of 30 securities chosen by dow jones and co - pretty sure that makes it an index

 

[donheff]

last time I looked it was the price-weighted average of 30 securities chosen by dow jones and co - pretty sure that makes it an index

Correct. I was thinking it is a price based average, not a market weighted index like the S&P 500. But it is an index.

 

[Out-to-Lunch]

1% difference. Just doesn't seem right. Think the Dow needs an adjustment.

Sorry, what was the question?

Interesting to note that Apple split the other day. Now its effect (going forward) on the Dow is 1/4 of what it was before, but its effect on the S&P is unchanged.

 

[augam]

The DOW (really the DOW Industrial Average, there are the transportation and utility averages too) is outdated - it was easy to calculate back when it was created back in the 1800's. The S&P 500 or (better) total US market are more indicative of "the market".

I blame the Wall Street Journal for continuing to keep this outmoded indicator alive.

It seems as though there was a time when the DOW and S & P were more in lockstep with the "market"

 

[DrRoy]

The DOW isn't an index. It's useless for anything other than answering "what's happening with the DOW?"

+1 First laugh of the day.

 

[Markola]

Indexs Dow vs. S & P

+1 First laugh of the day.

Don’t forget its primary purpose. If not for the DOW, the news industry interns and bots would have nothing to finish their boilerplate BS sentence, “Today the Dow (rose/fell/treaded water) on (optimism/fears/uncertainty) about (insert WSJ/NYT/Marvel Comics headline).

 

[OldShooter]

It seems as though there was a time when the DOW and S & P were more in lockstep with the "market"

Just curious: How do you know what "the market" is? What measurement/index is in lockstep?

Re "the Dow" generally, IMO it has lost its way. Originally the Industrial, Utilitity, and Transportation indices really were barometers of their particular segments. I don't follow Utilities or Transportation, but the "Industrials" certainly aren't limited to industriasl any more. Certainly JP Morgan, Walmart, and Walt Disney cannot be seriously considered to be "industrial."

 

[ERD50]

The DOW isn't an index. It's useless for anything other than answering "what's happening with the DOW?"

IMO, the DOW is the Paris Hilton of "indexes", it's famous for being famous.

And I do believe "indexes" is the accepted plural. Well, it's complicated:

https://www.grammar.com/indices_vs._indexes

But yeah, I see no value in following a group of 30 stocks as any sort of representation of "the market", when much broader benchmarks are readily available today..

-ERD50

 

[OldShooter]

...
And I do believe "indexes" is the accepted plural. Well, it's complicated:
https://www.grammar.com/indices_vs._indexes ...
-ERD50

Thanks for the link. You might want to read it:

"Indices" is a plural noun, one of the plural forms for "index", but only in a particular situation: when "index" refers to a system. "Indices" and "indexes" can refer to systems for recording changes and comparing values, usually in the financial domain. This is the only context where "indices" and "indexes" are synonyms, as well as the only situation where using "indices" is recommended.
​

 

[CardsFan]

IMO, the DOW is the Paris Hilton of "indexes", it's famous for being famous.

-ERD50

Brilliant!!

I look at the DOW as an indicator. Same with S&P. In general, a diversified portfolio will trend the same. But not the same percentage.

I find it humorous when the Dow is up 1%, and the S&P is "only" up 0.4%, and the talking heads say "the market was mixed today"

Isn't a market with umpteen thousand stocks ALWAYS mixed?

 

[maestro]

I'm 63, and the Dow was my dad's 'indicator', and used to be mine too. Today's Dow, as an 'indicator', is nothing more than a number. The Dow has continued to go up because anything that is NOT performing is 'voted off the island', ala XON and PFE being removed shortly. Dow means nothing to me. Only means something to those on Wall Street and in DC, who just want to elevate it to a 'new level', and pat themselves on the back for political and other purposes, just to deceive the next group of inexperienced masses.

 

[jimbee]

The Dow has been worthless since electronic computers have been commonly available.

 

[DrRoy]

Actually, I think the biggest problem with looking at index numbers is that they do not reflect total return. This can be a hugely distorting factor when comparing the total return of, for example, a fund to the change in an index value over the same period. I sometimes have trouble finding index total return numbers.

If you track for example SPX, you will get total return for the S&P 500.

 

[OldShooter]

If you track for example SPX, you will get total return for the S&P 500.

Sure. But then I have to find total return for SPY. The problem is unchanged.

My quick and dirty tactic is to use Portfoliovisualizer. I have no hard facts but I believe that they are giving me total return and not nominal return. It's a little crude, though, and I track two or three portfolios using quarterly total return numbers -- which I can't easily get from PV.

 

[Chuckanut]

The Dow has been worthless since electronic computers have been commonly available.

Your statement begs the question: How are the Dogs of the Dow doing these days? I remember reading that buying the Dogs was usually a good move and profitable over the next year or so.

 

[MichaelB]

Your statement begs the question: How are the Dogs of the Dow doing these days? I remember reading that buying the Dogs was usually a good move and profitable over the next year or so.

Still dogs, still underperforming.