This is not to say that the DJIA is not showing volatility. In 2020 coronavirus-induced crash, index dropped more over 30% from its pre-crisis peak and did not fully recover until November. However, a longer view shows that the first-order index can be more resilient relative to the S&P 500 in bear markets.
This is one of the reasons why DJIA stocks are generally more popular at the start of an economic crisis compared to the end. But even so, you can be sure that the DJIA will continue to increase in the long run. These are high quality and economically relevant actions. If they falter, whether in terms of performance or relevance, they are cut from the index. As an example, the DJIA abandoned Woolworth’s in the late 1990s and added Walmart. More recently, the index eliminated ExxonMobil, Pfizer and Raytheon in favor of Salesforce, Amgen and Honeywell.
The slow, steady nature of these blue chips is appealing when your investment goals involve eliminating the risk of your equity holdings or protecting your capital. It is not attractive if your goals include quick wealth or above market returns.
Two ways to invest in DJIA
You can invest in the DJIA by purchasing shares of the constituents of the index directly or by purchasing shares of a DJIA index fund. Since there are only 30 companies in the index, you can manage this portfolio like individual stocks. You would have to watch your holdings and any index changes, of course. But you avoid the expense of financing and have more freedom to make your own adjustments.
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