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For more than years, the Dow Jones Industrials DJINDICES: The average is a simple barometer of a small cross-section of the market, but its components represent the cream of the crop among U.

Yet despite its popularity, there are several things that most people don't know about the Dow, and the four facts below help provide longer-term perspective on the average and its future.

The number of stocks in the Dow has been left unchanged long enough that many investors refer to the average as the Dow Yet the Dow Jones Industrials hasn't always had 30 stocks.

Dow 30 Companies - CNNMoney

When it was first started, the Dow tracked only a dozen stocks. That number rose to 20 inand 12 years later, the Dow expanded to its current selection of 30 stocks. At one point within the past decade, the Averages Committee, which oversees the Dow, considered expanding the number of stocks that the average tracks to Yet in the end, the overseers of the Dow didn't make the change, largely because it couldn't come up with a compelling reason to make the change.

Indeed, although some point to the idea that 30 stocks would never be enough to represent the market fully, the counterargument is that having just 30 slots forces the Dow to exercise discipline in making decisions. Dating back tocorrelation figures by decade have been at 0.

One of the Dow's most unusual idiosyncrasies is its price-weighted calculation method, which favors stocks that have high share prices by granting them greater weight over the average than stocks with low share prices.

In some cases, that can make smaller companies have more weight than larger companies, simply money making guide rs3 2016 virtue of decisions on whether or not to implement stock splits or other decisions that have little to do with overall valuation. The Averages Committee has looked at this question in the past, and its decision not to switch to a market-cap weighting system centered on the fact that it wouldn't have made a big difference in the Dow's overall returns.

Indeed, the price-weighted system would have outperformed a theoretical market cap-weighted Dow, and that seemed compelling enough to leave the average alone. Companies that join the Dow tend to stay in the Dow, and many believe that the Dow is too slow to adapt to changing times fn-fal aftermarket parts the stock market.

In general, the Dow has resisted change for change's sake, instead waiting for a reason that it finds either compelling or unavoidable. Yet the Averages Committee has been increasingly responsive to the need to adapt.

Already sincethe Dow has replaced 10 components, which is more changes than it made from to Finding the right balance between consistency and responsiveness is tough, but the Dow has done a good job of walking the line for more than a century.

The Dow Jones Industrials is extremely popular, but erfahrungen forex broker are many things that investors don't know about it. Staying on top of events with the stock market benchmark can help you be a better investor.

Dan Caplinger has no position in any stocks mentioned. The Review forex automoney Fool has no position in any of the stocks mentioned.

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Dan Caplinger has been a contract writer for the Motley Fool since As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world. Skip to main content The Motley Fool Fool. Premium Advice Help Fool Answers Contact Us Login.

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