How—and Why—to Invest in the Dow

The Dow seems to prove that a reasonably diversified portfolio of 30 stocks will perform close to the broad market.

After 123 years, has the Dow Jones industrial average finally become obsolete? It pains me to think so. My fondness for the index can be traced to a book I coauthored 20 years ago called Dow 36,000, but today’s Dow is not the same as the Dow of 1999. [Editor’s Note: Read Knight Kiplinger’s 2011 take—Dow 36,000 Revisited —on James Glassman’s book, more than a decade after it was published.] More than half of the stocks have been replaced. Even so, the adjustments fail to reflect a U.S. economy dramatically changed by the internet. Where is (symbol AMZN, $1,870)? Where is Facebook (FB, $181)? Where is Alphabet (GOOGL, $1,086), alias Google? Not in the Dow. (Stocks I like are in bold; prices are as of June 14.)

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James K. Glassman
Contributing Columnist, Kiplinger's Personal Finance
James K. Glassman is a visiting fellow at the American Enterprise Institute. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence.