How the DOW works

[street]

I have a stupid question but when DOW stays about the same numbers with some small raises and small dips. Can your bottom dollar on your mutual funds go up in price? So what I'm saying is with little change can your funds increase because of valve has doe better. Of course this can go the other way as well I would imagine.

 

[pb4uski]

Most funds are much more diversified than the DJIA, which is only 30 stocks... so there could well be a change in the NAV of your fund (which likely has hundreds of different stocks) when the Dow is unchanged for the day or vice versa.

 

[Senator]

I have a stupid question but when DOW stays about the same numbers with some small raises and small dips. Can your bottom dollar on your mutual funds go up in price? So what I'm saying is with little change can your funds increase because of valve has doe better. Of course this can go the other way as well I would imagine.

The DOW is only 30 stocks. Most MFs have many others. Look at the S&P sectors. There are nearly always one+ sectors headed up. Or individual stocks headed up.

 

[street]

Senator >>>> so what you are saying is that could happen that my bottom line could go up right? I also realize that funds are so very well blended that if markets stayed neutral so to speak value my increase as well in some stocks.

I don't trade or do individual stocks on y own. I'm not smart enough and don't have the time or passion it would take to become good at it. I also don't care to think about money all the time. lol

Thank you Sir.

 

[braumeister]

could happen that my bottom line could go up right?

Also down.

 

[FIRE'd@51]

Another thing to keep in mind is that the DOW is a price-weighted index - it assumes one share of each of the 30 stocks. Consequently, higher priced stocks tend to have a greater effect. A 1% move in GS (price=240) will cause the Dow to increase by more points than a 1% move in PFE (price=32).

 

[RetireAge50]

Also the Dow index you see quoted in the news does not include dividends. So if the Dow starts the year at 20,000 and ends at 22,000 the return is about 12.75% not 10%.

 

[street]

Interesting and thanks.

 

[exnavynuke]

I'm still not sure why anyone anywhere bothers to talk about the DJIA anymore when the S&P and/or Russell etc indices are much more indicative of the market itself. When I was active in the trader community no one talked about the Dow, pretty much ever. I ignore it myself.

 

[COcheesehead]

Also the Dow index you see quoted in the news does not include dividends. So if the Dow starts the year at 20,000 and ends at 22,000 the return is about 12.75% not 10%.

If you are going to take it to this extent, the DOW doesn't also include trading fees and taxes.

 

[Big_Hitter]

one thing to note is that the dow is a price-weighted average, not a market-weighted average like the S&P 500 or Russell 2000, etc.

mutual funds can be constructed to mimic those indices

however, the value line index is a geometric average so you can't construct a portfolio that mimics it

(stuff I learned reading Bodie Kane and Marcus 25 years ago)

 

[Big_Hitter]

If you are going to take it to this extent, the DOW doesn't also include trading fees and taxes.

no but if you are invested in an index mutual fund I'd expect only passive investment fees which are minimal