Insider Hint: Which Indexes Should You Watch?

by David Jenyns on June 22, 2009

The Dow-Jones averages were first published as far back as 1884 and were originally the simple arithmetic averages of 11 active stocks, later increased to 12. By 1896 one average was made for the railroad stocks and another for industrial issues.

As now published, the Dow-Jones consists of four averages: 30 industrials, 20 rails, 15 utilities, and the combination of these into a 65-stock average, all being stocks listed upon the New York Stock Exchange. A certain theory of stock exchange forecasting, known as the Dow Theory, is based upon their behavior.

Other well-known averages are those of the New York Herald Tribune and The New York Times; the Standard & Poor is really an index. For the purposes of the investor of modest means, the important thing is that nobody buys or sells the stock “averages”; people buy individual stocks.

What is the best index?

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