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The Dow doesn't get to drop GM after it goes bankrupt and then not count its losses. The decline of GM hurt the Dow index just as much as it would have hurt any
by gibybo 15y ago
The Dow doesn't get to drop GM after it goes bankrupt and then not count its losses. The decline of GM hurt the Dow index just as much as it would have hurt anyone else that bought and sold GM stock when the Dow index added/dropped it.
It also represents an average of the market, so the fact that it was hard to mirror it exactly is not particularly relevant. Mirroring it approximately, or buying any other large basket of stocks, would have led to roughly the same result.
While it's true that an investment in Gold was better than an investment in USD, it wasn't better than common stock equities. You said the only way to capture a return better than Gold was to buy a particular stock at IPO, but that's just factually incorrect.
- shingen 15y agoThe Dow gets to replace GM with another growth vehicle of the modern era. While you take a real beating on the shares, the Dow simply swaps in a new stock (typically one with brighter prospects that can recharge the lost value in the Dow). You can't swap your dead GM shares for the shares in, say, John Deere when it's added to the index. Your money is gone.