The 3 Least Important Dow Components

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The following video is part of our "Motley Fool Conversations" series, in which senior analyst Anand Chokkavelu, CFA, discusses topics across the investing world.

The three least important Dow Jones components may surprise you -- especially the bottom one. For all the news it makes, Bank of America's daily gyrations barely dent the Dow. B of A's weighting is less than 0.5% (with 30 members, the average Dow component makes up 3.33% of the index). Alcoa and Cisco round out the bottom three. Anand explains how the Dow's price weighting methodology is flawed and how the S&P 500 (which includes all of the Dow 30) is a better index to follow.

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At the time this article was published Anand Chokkavelu, CFAowns shares of Bank of America, Cisco Systems, and long-dated Bank of America options. The Motley Fool owns shares of Bank of America. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not 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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