Apple will be joining the Dow Jones Industrial Average, according to S&P Dow Jones (via The Wall Street Journal ). Apple will be added to the Dow Jones at the close of trading on March 18, replacing AT&T as one of 30 members on the major price-weighted index. The Dow Jones industrial Average is price weighted, which means that the stocks that have the highest price make up the biggest positions in the index. Actually, price weighting is a much better way to create a portfolio than market weighting, which is why the DOW has outperformed the S&P 500 over the long-term. Market cap weighted indices naturally overweight companies that have performed well historically, hence, Apple being the largest position in the S&P 500 and the Nasdaq.
However, the stocks of companies that have grown very large are less likely to continue to outperform. In any event, the market knows the difference: NASDAQ close to unchanged; SP, down 1/2%; vs 1.2% for DOW. The Index is the official sustainability performance ranking of the largest 600 North American companies. It follows a best-in-class approach to measure and compare companies on environmental, social and corporate governance criteria. Earnings and dividends prior to 1929 have been estimated based on another stock market index.
Investors around the world use it as a tool to evaluate leadership and make decisions about which companies they want to invest in. The Dow Jones industrial average fell more than 1,000 points in early trading and the Standard & Poor’s 500 index fell into correction territory, that’s Wall Street jargon for a drop of 10 percent or more from a recent peak. China’s main index sank 8.5 percent amid fears over the health of the world’s second-largest economy.
The Shanghai index suffered its biggest percentage decline since February 2007, with many China-listed companies hitting their 10 percent downside limits. Hong Kong’s Hang Seng index fell 5.2 percent, Australia’s S&P ASX/200 slid 4.1 percent and South Korea’s Kospi lost 2.5 percent. The index has listed DSM as leader in its sector six times, and among the leaders on six other occasions, since 2004. Wientjes agrees that benchmarks such as the Dow Jones index have limitations, but rejects the notion that it and similar lists are just greenwashing” exercises designed to make companies appear more environmentally friendly.
DSM has been named as one of its sector’s leaders in environmental prudence in the Dow Jones Sustainability World Index, but the company says it sees such lists as a means, not an end. That would mean the real growth rate is actually lower than we assumed, and the Dow projection for 2008 should be lower. And you buy 5 units(of your Fund) of market value 10$ each(We call this value NAV).