Charles Dow created the Dow Jones Industrial Average (DJIA) in 1896. Originally the Dow had 12 companies:
American Cotton Oil; American Sugar; American Tobacco; Chicago Gas; Distilling & Cattle Feeding; General Electric; Laclede Gas; National Lead; North American; Tennessee Coal and Iron; U.S. Leather; U.S. Rubber
Not one of the original 12 DJIA stocks remain today as DJIA components.
That tells you the first couple of things you need to know in becoming a successful long-term investor.
First to remember, any stock average or index is not static, but is a revolving door. That is why I have never been interested in comparing my own investment record nor that of my clients against any average or index.
Second, most are either market capitalization (S&P 500) or price (Dow 30) weighted. Why would I want to consider my own investing program in comparison to two groups of stocks organized in a format that I would not dream of deploying myself?
So, where do you start? It is quite easy: Concentrate on diversification, dividends, compounding, and, above all, patience.
For something that doesn’t sound too hard, in my experience over five decades in the business of counseling investors, this seemingly easy menu is almost impossible for the individual investor to grasp.
In Part II of my series, I will help you get on just the right track to begin your journey as a comfortable and successful long-term investor.