5 Fun Facts About the Dow

Rejoice. The end of the work week is near.

To arm you for a weekend of mindless cocktail chatter, or for sharing as you linger a bit longer around the water cooler on Friday, here's a list of five fun facts about the Dow Jones Industrial Average (INDEX: ^DJI  ) -- of course, this is assuming that, unlike me, you do have plans for the weekend.

1. If you had invested $1 at the beginning ...
The DJIA was founded on May 26, 1896, by Wall Street Journal editor Charles Dow and statistician Edward Jones. The index closed that day at 40.94. If you had invested $1 in it then, you'd have approximately $305 today, a return of more than 30,300%.

2. General Electric is the last company standing
The index is a constantly evolving cast of major American blue-chip companies, selected and tweaked based upon reputation, growth, and investor interest.

Reading the names of the original 12 stocks included in the index transports you back to simpler era. There was the American Cotton Oil Company, the Distilling & Cattle Feeding Company, and the Tennessee Coal, Iron, and Railroad Company, to name a few.

Almost all of the original companies have since either evolved into something else or gone bankrupt. For example, American Tobacco Company was broken apart for antitrust reasons in 1911, spawning Reynolds American and Lorillard, among others. And United States Leather Company dissolved altogether in 1952.

Indeed, the only original company to remain on the index until now is General Electric (NYSE: GE  ) , currently the sixth largest American company in terms of market capitalization, and one of the most amazing examples of long-term investment returns on record. According to a 2007 article in USA Today, accounting for splits and adjustments, an original share in GE would have set you back a whopping 2.3 cents in today's dollar. In other words, had your great, great grandfather bought $1 worth of GE stock in 1892, today the stake would be worth $834, a return of more than 83,000%.

3. There's hardly anything "industrial" about it
The definition of "industrial" is somewhat of a moving target. A traditional online dictionary defines it as "of, relating to, or resulting from industry." And the Urban Dictionary defines it as "a style of music started in the mid-1970s by the seminal 'band' Throbbing Gristle." It then goes on to note that the band was known for the "painful noise and disturbed subject matter that seemed to spring eternal from their seriously crazed leader, Genesis P. Orridge."

Needless to say, neither of these definitions is very helpful.

The reality is that only seven of the index's 30 current components -- Alcoa (NYSE: AA  ) , Chevron, DuPont, ExxonMobil, United Technologies, 3M, and Caterpillar -- are truly "industrial" by any common-sense meaning of the term. The rest -- including Bank of America (NYSE: BAC  ) , Coca-Cola, and Johnson & Johnson -- look principally to the consumer market for patronage.

4. Three components got the boot in the financial crisis
As I mentioned, the components of the Dow are chosen based on their reputation, a history of sustained growth, and a high level of interest to a large number of investors. It should come as no surprise, in turn, that three companies, or 10% of the index, got the boot during the financial crisis.

On Sept. 22, 2008, a week after it received a life-sustaining bailout from the federal government, American International Group was replaced by Kraft Foods. And on June 8, 2009, both General Motors and Citigroup were unceremoniously removed in favor of insurance giant The Travelers and tech stalwart Cisco Systems (Nasdaq: CSCO  ) , the latter of which became only the third Nasdaq company to be part of the Dow after Microsoft and Intel.

5. DOW isn't part of the Dow
Finally, in a twist of irony, the only publically named company with "DOW" as its ticker symbol, Dow Chemical, isn't even a component of the Dow index -- and no, the best I can tell, there's no familial relationship, either. The slot evidently reserved for a chemical company is currently occupied by DuPont, the second largest chemical company in the world by market capitalization.

Foolish bottom line
For those of you pining for mindless investing trivia, I hope this list satisfied your desires. And for those of you left unsatisfied, I urge you to check out our recently released free report about stocks only the smartest investors are buying. It includes a financial giant that Warren Buffett has staked his reputation on, as well as a smaller company that our analysts believe has an extremely bright future. Learn the identity of these stocks before the rest of the market catches on.

Fool contributor John Maxfield owns shares in Bank of America. The Motley Fool owns shares of Bank of America, Intel, Microsoft, Johnson & Johnson, Cisco Systems, and Coca-Cola. Motley Fool newsletter services have recommended buying shares of 3M, General Motors, Chevron, Coca-Cola, Microsoft, Johnson & Johnson, and Intel, creating diagonal call positions in 3M and Johnson & Johnson, and creating a bull call spread position in Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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