The DJIA is currently down more than 17% from its all-time high of 14,198.10 back in October 2007. Given the declines we saw in the prior bear market, the fact that the DJIA is less than 20% from its highs is impressive enough, but there are some who believe the index would be even higher if it weren't for an error of omission back in 2009.
For a little background, back in June 2009, the keepers of the DJIA removed General Motors (GM) from the index and replaced it with Cisco (CSCO). To many observers, the substitution of a Technology company for an Industrial company made sense given that today's economy is more technology focused than it was when GM was originally added to the index. Where many people took issue, however, was with the selection of CSCO. While CSCO is certainly established enough to be included, many believed Apple Computer (AAPL) should have gotten the nod given its size and its reach on the American consumer. Just as there used to be a General Motors vehicle in nearly every American driveway, there's now an Apple product in practically every American household.
While we can't go back and change the past, we can always ask what would have been. With that in mind, where would the DJIA be today if AAPL had been added to the index instead of CSCO? The answer is a lot higher. The chart below compares the current DJIA (blue line) to where the DJIA would be had AAPL been added to the index instead of CSCO (red line). Although the index would still be below its all-time high, the depth of the hole would be much more shallow. Instead of trading at 11,725 (2,500 points below its all-time peak), the DJIA would be more than 1,000 points higher at 12,805, and only 9.8% from its all-time high.
The question now is whether or not investors would be better off with AAPL in the Dow or not. Investors that only hold the Dow tracking ETF (DIA) would definitely be better off. But outside of those few investors who invest solely in DJIA index funds, performance for most would likely be little changed. At the same time, would investors who are on the sidelines be even more reluctant to get back into the market if the DJIA was already within 10% of its all-time highs less than two years after the low?
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