aussie rules..why we should not follow the dow

Source MSN

Why investors should ignore the Dow
The 30-stock index represents the market to many people. But few of the stocks are worth buying, and a third should be dumped fast. If you don't own them, why follow them?

[Related content: Dow, stocks, investing strategy, stock market, GM]
By James Dlugosch, InvestorPlace
Rightly or wrongly, the 30 stocks in the Dow Jones industrials ($INDU) define the U.S. stock market for millions of people. Lots of funds, 401k's and individual retirement accounts rise and fall based on what the index does.


What numbers tell the most about the economy
So here's a scary thought: Only a handful of the 30 companies in the Dow are worth buying right now, and more than a third should be dumped immediately.

Take Bank of America (BAC, news, msgs). Despite $20 billion in bailout funds and a $118 billion backstop on loan losses, the company still managed to lose $2 billion in the third quarter. The government has guaranteed it won't go broke, but it's hardly an economic leader.

Or consider General Electric (GE, news, msgs). Profit dropped 44% in the third quarter, and the company recently announced plans to lay off an additional 3,000 workers. Yes, it's still one of the world's biggest manufacturers, but its stock price, near $14, is down from $40 two years ago, and the Jack Welch glory days are behind it.

This at a time when the broader economic indicators -- last week's robust gross-domestic-product report, for example -- seem to be pointing up. The market has been rallying since March. Certainly some members of the Dow 30 would be expected to lag, but more than half?

Times like this show the Dow is basically meaningless. Too many of the component companies are former kings of industry that simply have little to say about where the broader market is heading.

In short, the Dow isn't a group of stocks you'd want to own and much less one the whole market should follow.