Better Buy: Boeing or All 30 Dow Jones Stocks?

Although it initially stumbled following Monday’s reports that one of its 737 passenger jets operated by China Eastern Airlines had crashed, Boeing ( BA -2.62% ) shares were flying again on Tuesday.

At least part of that bounce can be attributed to the fact that the plane in question wasn’t a 737 MAX, nearly all of which were grounded following two crashes in late 2018 and early 2019. The aircraft manufacturer is still positioned to safely ride the post-pandemic rebound in leisure travel, and investors can plug into that recovery while Boeing shares are priced at less than half of 2019’s peak.

Before pulling the trigger on a purchase of this particular Dow Jones Industrial Average ( ^DJI 0.00% ) member, take a step back and consider an investment in Dow itself. It’s certainly a less stressful, less time-consuming option.

Consider your personal situation first

Every investment option has its pros and cons, to be clear. Boeing and a basket of the 30 stocks that make up the Dow Jones Industrial Average are no exception to this rule.

Boeing, for instance, will benefit from the eventual recovery of leisure travel that had been crimped due to the COVID-19 pandemic. Still, its dented reputation from the 737 MAX’s problems could persist for years. The Dow is a basket of blue-chip stocks, but even blue-chip stocks can bump into headwinds from time to time. Intel and 3M are Dow components, for example, yet each has been a subpar performer for some time now, weighing on the index’s overall performance.

Image source: Getty Images.

Every investor has a unique situation. You may already be heavily exposed to the travel industry with a name like Booking Holdings or Hyatt Hotels. Adding another related stock may or may not further diversify your portfolio. Or, perhaps you lack exposure to cyclical stocks and will likely miss out on any upside of continued economic recovery by not owning them.

Assuming that the risks and rewards are essentially identical between the two choices of the Dow Jones Industrial Average or Boeing, the Dow wins the vast majority of the time for most investors.

Here’s why.

Nobody can predict the unpredictable

In the long run, Boeing will be fine. It’s faced comparable hardships before, and the world will need a lot of new planes sooner or later.

In its most recent outlook on the matter, the company says growth in natural travel demand will necessitate the delivery of 43,610 new passenger jets between now and 2040. Assuming that no single commercial jet company is in a position to build that many aircraft anytime soon, Boeing’s share of the market should remain significant. Shareholders who have held the stock since 2019 are taking some solace in this bigger-picture trend.

However, shareholders who are being intellectually honest with themselves wish they had known then what they know now.

This is one of the key pitfalls of picking individual stocks. When you pick the right one, it’s a lot of fun. If you pick one that runs headfirst into unpredictable trouble, though, it can hurt. And that hurt is more than just the halving of Boeing’s shares since 2019. There’s also the element of missed opportunity. The Dow Jones Industrial Average is up 34% from the point where Boeing’s shares peaked, more than overcoming the steep sell-off it suffered when COVID first arrived in the United States in early 2020.

Start with the safety that only numbers can offer

We now know Boeing is one of the Dow’s recent dead weights, but we didn’t know that would be the case back then. It’s possible that in early 2019 we could have instead stepped into Dow components like Apple or Microsoft, which are up 265% and 155%, respectively, for the same time frame. But again, we didn’t know then how things would pan out over the next couple of years. That’s the point. Nobody can predict the future and how it might affect a particular stock.

Moreover, since most investors have jobs, families, hobbies, and other interests that prevent them from keeping constant tabs on several individual companies, it’s unlikely the average investor will be able to keep the watchful eye needed to effectively manage the risks of individual stocks. That’s especially the case if your entire portfolio consists of nothing else.

Still not convinced? Try this on for size. In its most recent number-crunching of the data, Standard & Poor’s reports that only about 15% of U.S. mutual funds outperformed the S&P 500 ( ^GSPC -1.23% ) last year. Stretch the time frame out to five years, and the outperformance rate of mutual funds only improves to about 26%.

If the professional stock-pickers equipped with tons of information can’t even do it, it’s certainly going to be tough for the amateur.

Bottom line: At the very least, most investors should ground their portfolios with a big block of index-based funds, only adding individual picks that are not only more predictable than Boeing but easy to monitor as well. In other words, whenever you can, always opt to keep things safe and simple.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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