The Dow Hits 20,000

Yesterday the Dow Jones Industrial Average reached a new high, passing the 20,000 level.  The NASDAQ index and the Standard & Poor’s 500 index also are at all-time highs.

gomez3It’s an interesting milestone, and one that is very pleasing to the millions of Americans who have money invested in stocks or mutual funds.  Investment in the stock market — especially through managed mutual funds — is one way the average American can put money away for retirement and (we hope) earn a decent return on our savings.  Over its history the Dow has been pretty dependable in that regard, overcoming periodic drops and crashes and showing significant long-term increases both in absolute terms and on an inflation-adjusted basis.  That’s why, if you’re taking a long-term view, financial planners will tell you that the stock market is the best place to put your money.

These days, of course, there aren’t many alternatives for the average folks.  The interest rates on CDs are a pittance, and the returns offered by municipal bonds and corporate bonds that used to be the bedrock of retirement planning aren’t very attractive, either.  Investing in stocks in “emerging markets” seems pretty risky, too.  Those are all forces that help to explain why the stock market has been on a prolonged bull market run that has seen the Dow triple in value since it hit its low point in the dark days of March 2009.

Unfortunately, some Americans who might have shared in the Dow’s run-up got out of the market right as it hit its low point.  Gallup has determined that, in 2016, only 52 percent of Americans adults have investments in the stock market, down from the all-time high of 65 percent in 2007.  Obviously, many of those people bolted when the market crashed in 2008 and 2009 and they’ve never come back — perhaps because they are too afraid of another crash, or perhaps because they were so hurt economically by the Great Recession that they simply aren’t in a position to invest.  Those who rode out the sub-prime storm, kept their heads, and kept their investments benefited.  It’s a classic example of why anyone who invests in the stock market can’t try to time the market and has to take a long-term view that follows a long-term plan.

20,000 is an artificial milestone, of course, and we’ll no doubt see downturns in the future — but the stock market remains an important way for the average people to build their retirements and plan for the future.  For those who are in the market, 20,000 is a welcome number indeed.

10 – Year – Anniversary

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It’s hard to believe it has been ten years since the Nasdaq hit it’s all time high of 5048.62 as this article points out. At the time I’m sure most investors were expecting the index to go much higher, but the index closed today at 2358.90 less than half its value ten years ago.

Like most investors I had my share of internet stocks and I was lucky enough to sell most of mine before the bubble burst. My list of technology stocks included America Online, Compaq Computer, Cisco Systems, Microsoft, Sun Microsystems and Corel. Currently I still own two, Cisco Systems and Microsoft that are down a couple thousand dollars from when I bought them.

For the most part I was pretty lucky as America Online merged with Time Warner, Compaq was bought out by Hewlett Packard and Sun Microsystems was acquired by Oracle. Corel had something to do with the Linux operating system that was to challenge Microsoft Windows which most desktop computers use.  In the first few days after I bought the stock it more than doubled and I sold it all.

One has to wonder if the Nasdaq will reach 5000 again in my lifetime.