Thanks to methodology, dogs can have their day in the benchmark average, but not for long.
Q: Is it true that the 30 Dow stocks are dogs?
A: There's no question there's usually a dog or two in the Dow, but the measure itself is fairly reflective of the market, which, for most people, means large-company stocks.
When the Dow Jones industrial average and the broader Standard & Poor's 500 index are plotted against each other, they move remarkably in tandem with each other. For instance, in the past five years, both the Dow and the S&P 500 are up by roughly the same amount: 50%.
But it's important to remember the Dow's constituents periodically do languish. When a member of the Dow falters, it's a more glaring problem since the measure has fewer members. But investors need to remember, too, that as the stock price of a Dow constituent falls, so does its influence on the average's value. The Dow places greater weight on stocks based on their per-share stock price compared with other market measures that weight stocks based on market value.
While changes to the Dow are rare, they are made in part to make sure the average mirrors the broader market. For instance, the biggest loser in the Dow so far this year had been aluminum maker Alcoa. With its shares trading for less than $10, Alcoa hasn't been a huge contributor to the Dow. But in September, Alcoa because even less of an issue after it was announced the stock was being removed from the benchmark indicator.