Measuring Market Performance at Asset Strategies Portfolio Services
George Vitta, President of Asset Strategies, gives advice on looking at market index performance. “Investors are mislead by the financial press on a daily basis. There is too much focus on the Dow Jones Industrial Average (DJIA) and whether it returns to 10,000 as it recently did, causing us to lose sight of the bigger picture. While the performance of the DJIA continues to be influenced by not only economic and corporate reports, natural disasters, and domestic and foreign political events, this stock index is computed from the daily price change of 30 very select publicly held U.S. companies. Several of the 30 companies are not even part of the U.S. industrial market sector. Further, unlike other stock indexes whose daily performance is based on the change of total market value of each company, the DJIA’s daily performance is based on the change in the price per share of each of the 30 stocks. This means the entire direction and the magnitude of the indexes daily performance can be unduly influenced by one, two, or simply a few stocks.”
A truly meaningful and more accurate approach, which parallels the philosophy of Asset Strategies, is to look at the S & P 500 or Russell 1000 Indices. “First, we believe that the companies represented in either of these indices is a superior representation of our diverse economy”, says George. “Second, we think the method for calculating these indices’ daily performance is more accurate than the DJIA methodology and thus gives a meaningful indication of the U.S. stock market’s daily results. Finally, we hope this critical, yet rational thinking inspires investors to stop and consider what they just heard or read for the benefit of their investment success.”
