Buy & Hold  vs. Professional Management

The media and the general public refer to the DOW Jones INDUSTRIAL 30 INDEX as The Market!  Watching the DOW 30 can be dangerous to your wealth. It is also a very dumb habit. It is a list of static widely held stocks selected by one individual who used to work for the DOW Jones Company.

INDUSTRIAL: What is industrial about McDonalds(MCD), Coca-Cola(KO). Merck(MRK), Proctor & Gamble(PG), American Express(AXP), Disney(DIS), Wal-Mart(WMT), and Home Depot(HD)? They are Large Cap stocks and global, but they are definitely not U.S. Industrial.

WEIGHTED: Two DOW stocks being traded at 50 are not treated alike in the DOW Index. The one stock with the larger number of shares outstanding is carried in the index at a higher value. In short, all DOW 30 stocks are weighted based on capitalization (price X # of shares outstanding.) This is unfair and most investors are ignorant of the fact AND THE MEDIA DOESN'T CARE. Investors should disregard the DOW 30 entirely and concentrate on creating a diversified portfolio.

FACTS: The DOW 30 attempted to crash the 1000 level for 16 years (see chart.) During that period a professional mutual fund (family created in 1928) produced in one of its funds (Pioneer II is now called Pioneer Value) a return of 2.4 times, expressed as follows:

  Start Date
Jan. 1966
End Date
Oct. 1982
DOW 30 983.51 991.72
PIONEER II 11.88 28.565*

*Value Differential = 19.02 + Cumulative Cap. Gain Distribution 9.545

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