Dow Hits 20K

The Dow hit an average over 20,000 this week and, for some, it is a huge milestone while, for others, it is insignificant.  As you all know, the stock market changes and fluctuates all the time.  Since November, those changes have been especially monitored and noticed because of the election and inauguration of a new President.  This steady growth of Dow Jones is a good sign of economic stability for the time being.  Read more about this milestone in the article from CNBC below.

Dow 20,000: Its insignificance may rival its importance

Jeff Brown, Special to

The Dow Jones industrial average has finally hit 20,000, and if it closes above that mark on Wednesday, it will surely be a market milestone. But if the long wait for Dow 20,000 already tired you out, don’t feel bad.

Dow 20,000 is not quite like running a four-minute mile or breaking the sound barrier. It’s little more than an imaginary line.

As a practical matter, Dow 20,001 will make investors richer than Dow 20,000, but surely won’t get as much attention. Big round numbers are easier to remember and visualize than the ones marking records leading up to them, just as the 20-foot pole vault seems easier to imagine than 19 feet, 11½ inches.

“Hitting 20,000 is significant only in terms of its emotional and psychological impact on us,” said Jeremy Torgerson, CEO of NVest Advisors in Brownsville, Texas. “We humans love round numbers.

“Remember New Year’s Day 2000, as a recent example,” he added. “That new year was somehow more meaningful than January 2, 2001, or January 1, 1999.”

The Dow’s climb up over time can’t make any claim to being a natural law of market evolution. It’s purely a human invention,created by The Wall Street Journal in 1896, and its makeup changes from time to time based on choices by editors at S&P Dow Jones Indices.

“The fact that people even monitor the Dow is an artifact of history,” said Robert Johnson, president of the American College of Financial Services in Bryn Mawr, Pennsylvania.

Joshua Lott | Getty Images – Trader yawning during the market day

It is the only price-weighted market index, a methodology that more heavily emphasizes moves by higher priced stocks than their lower priced counterparts — without sound logic, in Johnson’s opinion.

“People still refer to how many points the Dow is up or down, even though a 100-point move is roughly half a percent today and it was approximately 5 percent at the time of the 1987 crash,” Johnson said.

“The fact that people even monitor the Dow is an artifact of history.” -Robert Johnson, president of the American College of Financial Services

If the Dow were a typical average, prices of the 30 stocks would be added up and divided by 30. But instead the calculation uses a much smaller divisor — currently 0.14602128057775. The divisor has been adjusted over the decades to account for stock splits, spin-offs, mergers and stock dividends, to assure that numbers from before and after yield apples-to-apples comparisons.

What really matters to investors is percentage gains, not the number of points the Dow adds over time. So going from 1,000 to 2,000 doubled investors’ money, as did 5,000 to 10,000 and 10,000 to 20,000.

Up and down Dows

Investors may also be interested in how the Dow behaves after passing a big milestone. Unfortunately, there’s no pattern dependable enough to bet on.

“Back in 1999, we hit 10,000 and the market continued to run another 1,000 points, but in January 2000, the market went from 11,900 down to 9,600,” recalled Michael Darvish, senior financial advisor with Regal Securities in New York. “There is no specific pattern.

“It depends on the economic conditions,” he added. “We are on a Trump high right now. Last January, we had a sell-off, and I would not be surprised if we get another one this year as investors want to take some money off the table.”

Dow doublings

How long do Dow doublings take?

Fifteen years to go from 1,000 to 2,000 (1972–1987)

Four years from 5,000 to 10,000 (1995–1999)

About 17 years from 10,000 to 20,000 (1999–???)

An investor who wanted to bet on gains in the Dow could buy the 30 stocks, buy a fund that holds large-capitalization stocks including those in the Dow or make a pure play with SPDR Dow Jones Industrial Average ETF (DIA), an exchange-traded fund that owns the 30 Dow stocks.

But unless you own DIA, chances are your own results are different from the Dow’s. The other big-name stock index ETF, the Standard & Poor’s 500 (SPY), contains 500 stocks versus the Dow’s 30, but tends to move about the same as the Dow over time, since it also is composed of large-cap issues. But if you own foreign stocks, or small-company stocks, or shares in specific sectors, the Dow 20,000 may not matter much to you.

“What matters is not where the Dow is, or how round that number is, but how one’s own portfolio of investments is doing,” said Michal Strahilevitz, behavioral economist at Duke University’s Center for Advanced Hindsight. “For the wisest of investors, that will include a diverse range of index funds and such and not just a fund that tracks the Dow.”

A real milestone: Debt $20 trillion

Investors may be cheered by a milestone.

“It is significant because, from a momentum perspective, once people see Dow 20,000 then they can be convinced that Dow 25,000 is possible,” said Ted Jenkin, CEO of Oxygen Financial in Alpharetta, Georgia.

But they should not use the Dow milestone as an excuse to alter their long-term plan. “That is the best advice for anyone, no matter what the Dow has done, is doing or will do,” Strahilevitz said. “Timing the market based on anything is a fool’s strategy.

“It fails at least as often as it works.”

Stocks go down as well as up, of course, and the march to a new record is often interrupted by big downturns, such as the dotcom selloff and financial crisis crash that came between Dow 10,000 and 20,000. Smaller sell-offs come when investors decide to nail down profits after a big run and move to cash or some other holding. Deeper declines are often triggered by worries about corporate earnings or the health of the economy.

Erik Davidson, chief investment officer for Wells Fargo Private Bank, worries that the U.S. is quickly approaching another milestone that could dampen market performance: $20 trillion in government debt. He calculates that, while the Dow has produced a total return, including reinvested dividends, of 153 percent since the start of the 21st century, the debt has gone up 253 percent.

“While we will likely be seeing many Dow 20,000 hats, I sincerely doubt that we will see a single Debt $20 Trillion hat,” Davidson said. “That says a lot about where the market is focusing these days.”

By Jeff Brown, special to

(Update: This story has been updated to reflect the Dow opening above 20,000 on Wednesday, Jan. 25.)

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Getting Serious About Your Money

It’s not too late to consider a new year’s resolution, and being smarter with your money is a great one.  Saving money and planning out a financial forecast are habits most people adapt easily.  However, to truly be prosperous and successful you need to adapt other habits that might not come as easily.  Those habits are discussed in the article from Entrepreneur Magazine below.  Make note of them and see how great your finances look by the end of 2017.

10 Money Habits That Will Help You Get Serious About Prosperity

Take your financial life to the next level through actions like seeking new income sources, making debts your priority and separating friendship from business.
by Ayodeji Onibalusi | Contributor | Entrepreneur and Online Marketing Expert
January 25, 2017

The power of habit can be quite interesting. Rather than create 2017 resolutions that may not stick, a good alternative is to develop positive habits this year. Especially when the category is financial life.

So, make it your goal to form new habits that will take your financial life to the next level.

From learning a new skill every day to hitting the gym regularly, habit takes away the one singular thing that prevents us from getting things done — resistance. With good habits, we no longer resist. We just do it.

You can quickly attain financial freedom by positively channeling the power of habit toward how you treat money. But, first, let’s look at the steps to developing new habits.

Author James Clear breaks down habit formation into three steps (the three R’s): reminder (what triggers the behavior); routine (the habit itself) and reward (what you get from this behavior). In order for a habit to stick, it must follow the three R’s rule. By practicing some of the following habits, your reward will be a more financially rewarding lifestyle.

1. Be clear about your financial goals.

One habit you need to develop is clarity toward your goals. Your goals can shape your attitude toward whatever you do and put you in the right perspective about your financial life. Lack of clarity is equivalent to having no goals at all.

“Clarity about your money goals is the first step towards getting your finances right,” Yasir Khan, founder and chief editor at, told me. “Getting your finances right — being able to prioritize what you do with your money — can only be achieved by clearing the unnecessary obligations out of the way.”

Developing a habit of being clear about your financial goals will also create a sense of focus, which is the psychological effect of setting goals. Let’s assume your aim is to start your own business this year. You’ll outline how much funding is required to do that, and how much you want to raise yourself.

2. Stop associating guilt with money.

One habit which keeps a person from growing financially is how he or she feels about money. A lot of people feel guilty, which is why they often find it difficult to discuss the financial terms of a business relationship before starting one.

Develop a positive attitude toward money this year by overcoming any guilt you feel about money.

3. Seek more income sources.

The best way to improve your financial life this year is to use your free time to earn an extra income. Start by looking at areas where you can fill a need and earn extra money in the process.

And make converting your spare time into income opportunities a habit. You could freelance for businesses or help people with things they can’t do themselves. Khan said he was able to start two small businesses apart from his main job when he noticed he could use his free time to help others. Now that his side businesses are growing, he hires people to help him run the business.

4. Make clearing your debts a priority.

One of the biggest hindrances to financial growth is debt. The problem is that debt keeps compounding, making it your most expensive liability. Start paying off your debt with each paycheck you earn. By forming this habit, you could become debt-free by the end of 2017.

5. Save to secure your future.

Make saving a habit in 2017. The more you save, the more you’ll have when you retire. JPMorgan Chase puts together an annual guide to retirement that provides investment and savings strategies for all stages of life.

6. Separate friendship from business.

Underscore the purpose of your relationship with others, and make it a habit to always separate money from friendship and friendship from business.

A lot of relationships have gone to ruin because of money. In 2017, be careful when forming business relationships. Make sure you know enough about someone before entering into such a relationship. Use background check tools like Check Them or Check People before a first meeting. Entering into a relationship with the wrong person could be costly or devastating to your financial life.

7. See money as a means, not an end.

Many people get the notion of money very wrong. Because we see money as the end goal, it affects our orientation about it. See money as what it is and what it’s meant to be — a tool, a means to an end. What the end is for every one of us may be different. For most, it might be happiness, while for others it’s simply a comfortable lifestyle.

8. Seek advice from money experts.

Develop a habit of seeking advice before making any major financial decision. This will help you avoid making any decision you’ll end up regretting. When you make a habit of seeking financial advice, you’ll be less likely to take financial risks that could hurt your lifestyle.

9. Decide against impulse buying.

Make it a habit to spend only on things you need. Cut back on impulse buying by weighing your options before making any purchase. When you buy on impulse, you only gain a temporary sense of satisfaction. Once this instant gratification has worn off, what you’re left with is a shrunken purse and a tinge of regret, or buyer’s remorse.

10. Live below your means.

Many wealthy individuals mastered the habit of living below their means, even before they became hugely successful. A lot of wealthy individuals prefer to live a frugal lifestyle.

Going frugal can help you create a financial lifestyle that’s easily manageable. It can leave you with enough money and time to invest into your business and relationship. And that’s what good money habits are all about.

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