In financial advisors’ offices all over the world there is a chart which shows the growth of the stock market over the years. If you put your money in the market, it will grow over the years. The chart is based on the Dow Jones Index. What the chart does not tell you is every year the indexes can be changed and the stocks that are not doing well are replaced by stocks doing well. This means the index tends to capture whatever stocks do well in every market and over the long term – they go up. For investors, if you own the individual stocks, being in the index is a very good thing. If the stock is to be dropped from the index, it is another blow to the stock.

In an article by Arsheeya Bajwa of Reuters, the example of Intel is a very good learning tool. Intel (the chip inside your computer) joined the Dow Jones Industrial Average in the late 1990’s. In the recent past, the stock has a slow decline and is the worst performer in the Dow Jones Industrial Average.

The company has missed out on the artificial intelligence boom after passing on an OpenAI investment and losses are mounting at the contract manufacturing unit. The company has suspended its dividend and is cutting its workplace by 15%. Is it enough?

Summit Insights Group analyst Kinngai Chan said, End-market demand is not favorable for Intel, as well as the missteps on their product road map.

S&P Dow Jones Indices manages the Dow index. Changes are made as needed, the last change was Walgreens Boots Alliance was replaced by Amazon.

Stock price is a key element for inclusion in the Dow, unlike the S&P 500 index which takes into account market value.

Linking to dividend paying stocks, with the growth of people and institutions using index funds for long term investing, being in the index is worth something because all the index funds using the base must buy the stock. In this case whatever company is the replacement will be bought and Intel will be sold (the day will be announced in advance as indexes readjust for the changes). The firms that run the index tend to like profitable stocks because they will be in the index longer. If the profitable stock also pays a dividend so much the better if you own the stock individually.

There are more questions than answers, till the next time – to raising questions.