What Dow 20,000 Means

Not much. For the media it means headlines and talking points. For traders and speculators, it may be an excuse to make some trade based on expected short-term outcomes. For investors, it means nothing – except for its potential to distract you from what really matters. 

It’s nice that stock market indexes are increasing, but what does it really matter that the Dow hit 20,000? Sure, it’s a nice round number with lots of zeros. But there is really no difference between the Dow hitting 20,000, 20,126 or 19,944.

Your financial goals are unaffected by an arbitrary index hitting some round number, even if that number is “psychologically important” as they say. Your financial goals are affected to a much greater degree by the investment choices you make. 

Does Dow 20,000 influence you to predict where the market is heading? After all that's what the experts are doing right now. Perhaps you are thinking “Wow, that is expensive, maybe I should lighten up on stocks.”  Or maybe you are thinking, “This has legs. Let’s back up the truck and buy more US stocks.”

Either way, your investment decisions should not be made based on some arbitrary figure. If there is anything we have learned throughout the history of the market it is that the market goes a lot lower than we expect during bad times and a lot higher than we expect during good times. And decades of market history has shown that the most consistent and costly investor error is to speculate on the market’s direction.

That is the why we encourage, persuade and plead that you remain focused on your plan. The plan is customized to your needs and desires. It isn’t influenced by the headlines of the day nor the whims of the market. It is the constant in an otherwise unpredictable and volatile market.

 

 

 

 


Disclosure
The Dow Jones Industrial Average Index is comprised of U.S.-listed stocks of companies that produce other (non-transportation and non-utility) goods and services. The Dow Jones industrial averages are maintained by editors of The Wall Street Journal. While the stock selection process is somewhat subjective, a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth, is of interest to a large number of investors, and accurately represents the market sectors covered by the average. The Dow Jones averages are unique in that they are price weighted; therefore, their component weightings are affected only by changes in the stocks’ prices. It is not possible to invest directly in an index.