Out With The Old, In With The New
BY MICHAEL SICURANZA
This week the DOW JONES replaced Exxon, Raytheon, and Pfizer in their most iconic index, the Industrial Average. Most of us know this as the Dow 30. Replacing those iconic names are Salesforce, Amgen and Honeywell. For Exxon, this ended a 92-year run in the index and was the longest tenured Dow component. Previously, the longest tenured stock was GE at 110 years and was booted from the index in 2018 for Walgreens. For Honeywell, this is their second bite at the apple after being replaced 10 years ago. Prior to this change there have been 54 changes to the index since 1896.
Why does this matter? Well, for one it continues to shows the changing definition of what an “Industrial” is and what is a good representative of the economy. Our economy has evolved into a more high tech, biotech/science engine that is driving growth. Even within the energy space, technology players (think shale and natural gas) dominate versus producers like Exxon.
Oh and this chart, could also play a part (credit Allstarcharts). This is the returns of the current and future components going back to early 2018.
As investors, we need to recognize a few truths in investing, especially in stocks:
The stock that helped your parents get to retirement, might not be the same that get you there.
Stocks that helped you get to retirement, might not be the ones to get you through retirement.
Stocks that you have losses in might not be the best ones to make your money back.
Good companies and good stocks are not the same thing.
Investing for the long term is important BUT with stocks, you have to learn to take a profit or a loss. Paying taxes is a GOOD thing instead of watching those hard earned gains disappear.
If it can happen to GE, Exxon, GM and so many others, it will eventually happen to Apple, Amazon, Microsoft and Facebook. When the time comes, what is the strategy or game plan.
As always, we are here to help and answer any questions you might have.