Dow Jones vs. Gold

Has the Dow Jones Industrial Average outperformed gold? In 1975, American citizens were again allowed to legally own gold bullion coins. You may hear or see claims that since 1975 — or any other long-ago starting point year — the Dow Jones Industrial Average generated a greater return on investment than gold. But that is a statistically invalid, apples-to-oranges comparison.

Here’s why: A one-ounce gold coin doesn’t change; it remains one ounce of gold. But the composition of the Dow as a managed stock index has changed over three dozen times since 1975. In fact, it has changed a half dozen times just in the last five years since 2018. Companies that declined in profitability or went out of business were deliberately replaced by other publicly traded firms. So, any long-term comparison between the price of gold to the repeatedly-changed components of the Dow can be misleading and worthless.