The Dow Jones Industrial Average — the storied aggregation of 30 blue-chip industrial and manufacturing stocks — underwent a significant shakeup in late-August. Three of the Dow’s constituent members, Exxon Mobile, Pfizer, and Raytheon, were dropped from the index, replaced instead by Salesforce, Amgen, and Honeywell.
Initially devised to capture and quantify the holistic performance of the country’s industrial sectors, the Dow has increasingly incorporated big tech and entertainment firms into its ranks, coming almost to mirror its counterpart, the tech-heavy NASDAQ. Within this shift lies a key set of lessons for investors and aspiring venture capitalists that extends to all corners of the market.
While the Dow contains only the highest performing US stocks — companies like Apple, Boeing, or Disney — this realignment reaffirms some of the most significant trends in investing, creating new incentives for investors and entrepreneurs.
We sat down with entrepreneur and venture capitalist Amit Raizada to gain some critical insights into what this shift should signify to investors. The founder and CEO of Spectrum Business Ventures, Raizada has spent more than twenty years in venture capital and has invested in myriad innovative startups and firms.
“The Dow Jones has always been synonymous with heavy industry, with manufacturing and production lines,” said Raizada. “But as the American economy changes, so goes the Dow. This shakeup is a microcosm for the realignment we’ve seen in recent years, in which technology and services have become increasingly critical components of our economy.”
Raizada felt the shakeup was particularly indicative of current market trends, which he encouraged aspiring investors to closely watch in his lessons from a ride share giants piece he shared on his website recently.
“In my twenty years in this business, I’ve always sought to closely follow emerging market trends, seeking out the ventures that — while maybe not profitable today — could come to determine the trajectory of our economy in ten or fifteen years,” Raizada said. “That’s exactly what we’re seeing here. Two of the Dow’s new members — Salesforce and Amgen — are logical additions given the current state of the market. In our current state of affairs, technology and biomedical research have never been more critical.”
Raizada’s firm has long been an integral investor in both the tech and biomedical research fields, he said. His early investments in two gift card service companies, Card Compliant and Store Financial, helped make electronic gift cards viable.
Through Spectrum Business Ventures, Raizada has also been a key investor in medical technology. Raizada’s investments have helped develop a groundbreaking cancer treatment that weaponizes the body’s immune system against tumors, eating away cancerous tissue from the inside out. His work with Dalent Medical contributed to a revolutionary new ear, nose, and throat treatment that offers more effective, less invasive standards of care.
“These are the markets of the future, and it seems that institutions like the Dow Jones are catching on,” said Raizada. “Young investors should make the most of this new opportunity. Observe closely the products in trends in which young people express interest and seek out innovative startups and entrepreneurs developing products to service these needs.
“The economy is at a critical juncture, particularly in the wake of the COVID-19 pandemic. As we witness this new enthusiasm for tech and biomedical research, carve a foothold for yourself in the markets of the future.”
Photo Credit: stock photo
Very enlightening article. Thanks!