How Wal-Mart Drives the Dow

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The following video is part of our "Motley Fool Conversations" series, in which consumer-goods editor and analyst Austin Smith discusses topics around the investing world.

In today's edition, Austin sheds a little light on how Wal-Mart influences the Dow Jones Industrial Average's daily movements. Despite being the world's largest retailer, and one of the largest companies on the Dow by market cap, investors may be surprised to learn that the company makes up only 3.5% of the index's overall composition. However, Austin thinks the company actually has a bit more influence than this weighting suggests. While Wal-Mart may never reach the influence of, say, IBM, which dominates the Dow's movements, he thinks the fact that the retailer is considered an economic bellwether influences the other 17% or so of non-cyclical stocks that comprise the index in a not-so-obvious way.

While it's fun to watch the daily movements of the market, it's no way to invest. It's only a quick way to high-blood pressure and low returns. Instead, investors should buy great stocks for the long term and let the market work its magic. If you're looking for one such stock, you can start today by learning about "The Motley Fool's Top Stock for 2012." It's an emerging-market retailer with enormous market potential that's still flying under Wall-Street's radar. Read more here.

At the time this article was published Austin Smithhas no positions in the stocks mentioned above. The Motley Fool owns shares of IBM.Motley Fool newsletter services recommendChevron. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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