Recently, I ran across this article from Dimensional Fund Advisors. It contains insight into the difference between a price-weighted index like the Dow Jones Industrial Average (DJIA), and a cap-weighted index like the S&P 500. It puts into perspective the large swings in the DJIA, and highlights the limitations when comparing a portfolio to an index. We think it’s worth a read:

Getting to the Point of a Point article from DFA

James Twining
Latest posts by James Twining (see all)