Fred Wilson has an interesting article here, where he shows this picture:
His conclusion is the the DOW is the ‘old’ companies and that the NASDAQ representing ‘new’ companies will always outperform the DOW. I think he is right.
But he is not taking his thinking far enough. The ‘new’ companies these days are not in the US. They are in China. Drawing a similar graph as above, but including a NYSE listed ETF (NYSE:FXI) tracking Chinese companies shows you how much better they perform:
In the year to date, the DOW is down 8.5%, the NASDAQ is up 3.2% and the FXI is up 13.8%. This results is consistent over different periods of time. It means that NASDAQ is growing faster than the DOW and that FXI is growing faster than NASDAQ.
The principle is correct. Young, hungry companies are growing faster than older, more established companies. And China has a lot of young, hungry, fast growing companies.