The Dow Jones Industrial Average Loses Diversification
Sep 11th 2013 10:21AM
Updated Sep 11th 2013 10:30AM
For 54 years, Alcoa represented the metals and mining sectors as part of the Dow Jones Industrial Average . That era has come to a close as of yesterday, when the index announced it would be trading the traditional earnings lead-off hitter for a sportier brand -- Nike . While Nike's logo and worldwide recognition might provide the Dow with a more mainstream appeal, it certainly detracts from the index's overall depiction of the American economy.
The index will now rely on just two sectors 14 out of its 30 components - seven each from consumer goods and tech/telecom. Additionally, Dow cites the share performance of the three companies it dropped as key reasons for their departure. In my mind, a lack of correlation to the rest of the index is a benefit to those who follow it since it is a rare occurrence to see every sector performing well at the same time. With that said, it is time to start adjusting to the new make up of the Dow regardless of whether or not it was a wise move.
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The article The Dow Jones Industrial Average Loses Diversification originally appeared on Fool.com.Joel South has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.