How much are stocks up this year? That common question is getting harder to answer. Many individuals look to the Dow Jones Industrial Average, which was established in 1896, when it comes to measuring the market. Although it has a great history, it’s a lousy measure of the stock market.

Last year I wrote that it was time to retire the Dow. I’m not alone with that view. The Dow is a price-based average so high-priced components like UnitedHealth ($540) play a far bigger role than Cisco ($60) and Walmart ($97). That’s ridiculous. Plus, there are only 30 stocks in the Dow.

For those reasons there was near universal agreement that the S&P 500 Index better represented “the market.” But that’s not the case anymore. That index can be retired as well.

The S&P 500 is a capitalization-weighted index so the larger the company the bigger its influence. In recent years the largest companies have grown faster than others so the S&P 500 Index is greatly influenced by a few holdings. The largest five stocks (Apple, Microsoft, Nvidia, Amazon, and Meta Platforms) determine 26 percent of the index’s movement. Technology stocks have a nearly 35 percent weighting. Instead of showing what most stocks are doing, the S&P 500 has become a technology index.

Case in point: On the January 27 “deepseek” sell-off, the S&P 500 dropped 1.5 percent even though more stocks were up than down. The S&P 500 fell because the technology sector was being sold. It was a bad day for those who owned S&P 500 index funds and it was a warning shot for what will happen if technology stocks underperform during the next bear market. S&P 500 index fund investors are not diversified.

Billionaire investor Chamath Palihapitiya has also sounded the alarm. He warned that S&P 500 investors will have a “rude awakening” because the top ten stocks in the index represent 40 percent of the capitalization. The greater concentration increases the risk.

A better measure of what most stocks are doing is an unweighted S&P 500 Index (every stock in the index is equally important). That is found in the Invesco S&P 500 Equal Weight ETF (RSP). Though an ETF won’t become the standard measure of the market I’d rather own this ETF for the long term than I would an S&P 500 index fund. Those who hold large S&P 500 positions are in effect technology investors. I hope they know that.

David Vomund is an Incline Village-based Independent Investment Advisor. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.