Dow Jones Industrial Average (inflation-adjusted) since 1915.

Dow Jones Industrial Average continues to go up, despite numerous economic recessions & financial crises. Is there any way to make money on its 100-year uptrend?

Yes — you can invest in ETFs (Exchange-Traded Funds) that track “the Dow”, as they call it. Their brochures tout the investment as “almost riskless”, because, well, take a look at the chart!… But is it really so?

Constituents performance

“Constituents” are companies that make up the Dow Jones Industrial Average (DJIA). They are the most well-known companies in US… or at least were the most well-known companies back in the old days.

None of the original 12 companies are part of the index.

Since DJIA was introduced in 1896, the companies that made up the index have either dissolved, became subsidiaries, merged into other companies after substantial devaluation, or straight up filed for bankruptcy.

Index performance

However, while the original companies were going down, the Dow Jones Industrial Average was going up.

This happened because the constituents were swapped by the publishers of the index. It’s still Top 30 US companies — just different ones.

So if you had invested in DJIA companies back in 1896, you wouldn’t enjoy the same 100-year uptrend, unless you also rebalanced your portfolio according to index changes.

But with rebalancing, it actually makes sense.

So yeah, you can go ahead and buy the ETFs (they will swap the constituents for you). Just wait for the correction before buying.

P.S. This article was written under hypothesis investing in ETFs is more risky than buying individual stocks. However, after researching the topic further, I came to the conclusion that ETFs are actually less risky.