The Pilots Page

Throughout its eight-year history Beat The Dow has been closely associated with Continental Airlines pilots and other participants in the Continental Airlines' 401(k) Plan. This page describes the history of that relationship and the related evolution of the Beat The Dow web site.

Beat The Dow was launched in 1999 for participants in Continental Airlines' 401(k) plan

In May 1999, five months before the Continental Airlines' 401(k) plan added 44 Fidelity and Janus funds to the 30-plus T. Rowe Price funds in its investment mix, Beat The Dow was launched to help plan participants take advantage of the enhanced options, options which made the Continental 401(k) perhaps the best plan in the country at the time. The new investment options even included 11 Fidelity Select funds, which were available to plan participants without the sales loads or 30-day redemption fees charged Fidelity's retail customers. The initial Beat The Dow web site offered twice-monthly newsletters, a library of featured articles, and model portfolios, but the most-visited pages were those which ranked funds available for investment by relative strength in tables that presaged the GO Charts of today.

Beat The Dow gravitated with Continental pilots to their new 401(k) plan in 2005

In September 2005, Continental Airline pilots moved to a new plan offering Schwab brokerage accounts, while flight attendents, grounds personnel, and management employees remained in the old plan. In lieu of the brokerage account option, the pilots' plan offered 15 to 20 core portfolios which Beat The Dow monitored through the end of 2006, when a year's worth of data demonstrated conclusively that the core portfolios offered much less opportunity than the brokerage account option. At first, Beat The Dow also continued to track the old plan's investment options, but so many trading restrictions had been imposed on the Fidelity, Janus and T. Rowe Price funds that Beat The Dow's trading philosophy was of limited use here. For a while Beat The Dow also tracked the 30 stocks comprising the Dow Jones Industrial Average, but it subsequently abandoned all stock-tracking in favor of concentrating on ETFs ( Exchange Traded Funds) together with those few mutual fund families whose offerings could be bought and sold without sales loads, transaction charges, or redemption fees.

We monitor ETFs instead of stocks for several reasons

ETFs represent baskets of stocks and thus, like mutual funds, are inherently diversified. One may think of them as mutual funds that trade like stocks, meaning they are priced throughout the day and investors may buy and sell them at predetermined prices. (Click here for an article on ETFs.) A single ETF may represent hundreds of stocks and be bought and sold for a small fixed-fee brokerage commission. For a portfolio holding only stocks to be sufficiently diversified, however, experts contend that 15 to 50 different stocks--depending on the expert--should be held, entailing commissions for each purchase and sale and necessitating a large account balance. The Continental Airlines 401(k) plan has an as-yet-unenforced restriction limiting the purchase of a single stock to 10% of the account balance just to encourage such diversification. Also, investment plans like 401(k)s, in which small periodic contributions are added throughout the year, lend themselves far more readily to acquiring mutual funds (and ETFs) than stocks, which are traditionally purchased and sold in hundred-share lots.

Another reason for monitoring ETFs instead of stocks is that, so far, there are only a few hundred ETFs to monitor--some of which are redundant--versus several thousand stocks.