Newspaper article The Christian Science Monitor

How to Ride the Dow as a Stock Picker

Newspaper article The Christian Science Monitor

How to Ride the Dow as a Stock Picker

Article excerpt

Color them true-blue, the bluest of the blue chips, among the best known corporate enterprises in the world.

They are the 30 stocks that make up the Dow Jones industrial average, the world's best-known stock market index.

The 100-year-old index is also a good place to start looking if you're interested in buying shares of individual companies, some experts say. David and Tom Gardner, famous for their Motley Fool investment site on the Internet (www.fool.com), argue that a new investor's first stocks should include Dow stocks. They devote an entire section of their best-selling investment guide to this argument. Of course, by just buying into the Dow, you could miss out on many opportunities, including high-tech revolutions, says James Fraser, who heads Fraser Management Associates in Burlington, Vt. And many giants like Microsoft and Intel aren't in the Dow. But the index steers you to a list of companies that represent the cream of American industry. "These indexes are 'managed' indexes," not random samples, explains Abby Joseph Cohen, market strategist at Goldman, Sachs. She refers to the Dow and its larger cousin, the Standard & Poor's 500 index. New kids on block That became clear in March, when the editors of The Wall Street Journal, who oversee the Dow, booted out four companies, and replaced them with four others. Gone are Bethlehem Steel, Texaco, Westinghouse, and Woolworth. The new kids are Hewlett-Packard, Johnson & Johnson, Travelers Group, and Wal-Mart. Analysts say these firms push the Dow's weighting away from old-line industries (oil and steel) and toward the service, financial, health, and technology sectors that are fueling much of the nation's economic growth. Dow stocks "can have a bad year. But usually, they have better years than almost all other companies in the United States," says another investment firm officer. One reason, says Mr. Fraser, is that these companies are global in scope, not dependent just on America for growth. …

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