It might be popular, but it's not very useful:
First calculated on May 26, 1896, the Dow Jones Industrial Average is the second oldest US market index after the Dow Jones Transportation Average. The Dow measures the performance of 30 large companies listed on US stock exchanges. It was created by Charles Dow, the editor of The Wall Street Journal and the co-founder of Dow Jones & Company. It was named after him and his business associate, statistician Edward Jones. Ed is long gone, and so these days, companies to be included in the Dow are selected by a committee and the index is maintained by Standard & Poors.
Although it is one of the most commonly followed equity indices, it is a poor representation of the overall US stock market because it only includes 30 companies, is not weighted by market capitalisation, and does not use a weighted arithmetic mean. The value of the index is calculated based on the sum of the stock prices of the companies included in the index. So, a company with a higher share price has a bigger impact on the index regardless of its size.
The oldest constituent of the index right now is Procter and Gamble, the manufacturer behind cleaning, personal care and hygiene products such as Gillette, Febreze, Pantene, Olay, Old Spice and Vicks. Weirdly, when researching this, we discovered that Procter and Gamble also owns the Aussie Haircare brand. The logo is a Kangaroo and the slogan is "add some roo to your do". It is not available in Australia, probably because that tag line is so bad that nobody would buy it! Procter has been in the Dow since 1932. The next oldest constituent is yellow sticky note maker 3M, which was added in 1976. The newest are Amgen, Honeywell and Salesforce, which were added in August this year.
The largest component of the Dow is UnitedHealth Group, a health care company based in Minnesota. Three of the ten largest US companies (Amazon, Alphabet & Facebook) are not Dow members.
If you're interested, Visual Capitalist has a great graphic of every company in and out of the Dow since 1928, which you can view here.
Chart of the month - 200 years of interest rates.
We know we keep banging on about interest rates. But they are important because they impact the prices of most other assets over the long term. And perhaps the most important interest rate in the world is the US 10 year treasury (Government) bond yield.
As you can see below, we are at an all time low. Historically, these rates usually have cycles that last between 22 and 27 years. When cycles shift from rising to falling rates, a quick reversal typically takes place. This was last seen in 1982, when interest rates dropped 25%—from 14.2% to 10.4%—in one year. However, a different trend can be seen when falling rates switch to rising trends. These reversals typically average 2-14 years.
As near-zero rates seem likely for the extended future, ultra-low income yields may continue for some time. Which of course makes it all the more important to be able to identify alternative investment opportunities that can still deliver decent returns. That is something we spend a lot of time working on.