Update April 18, 2016. The Dow finished above the 18,000 mark for the first time since July of 2015. The Dow hit 15,666 on August 25, 2015 and then plunged again to 15,660 on February 11 of 2016. Since that low the average is up 15% to finish at 18,004 today. Is hitting 18,000 a big deal this time? Only time will tell. Roger
In February of 2013 I wrote Dow 14,000 – Big Deal or Just a Number? Today the Dow Jones Industrial Average closed at 17,778 after a 421 point gain. This is on the heels of a better than 200 point rise yesterday marking the average’s largest two day gain in 12 years. Dow 18,000 looks like it will not be far off.
Just as I thought Dow 14,000 was a pretty meaningless number, I also think Dow 18,000 is equally meaningless. In fact there are many, including yours truly, who think the Dow Jones Industrial Average isn’t all that meaningful as a benchmark.
Rather than focusing on the level of the market you should focus on your portfolio and your investment strategy. Some specific action steps you might consider:
Rebalance your portfolio
You should have a strategy to review your overall portfolio on a regular basis (annually, semi-annually etc.) to ensure that your asset allocation is within your target allocation. Invariably certain asset classes will outperform or under perform. Bringing your portfolio back into balance forces you to sell off some winners and fund those asset classes that have underperformed.
Market leaders and laggards shift periodically and this approach adds a level of discipline to your strategy. Mostly rebalancing helps mitigate investment risk.
Keep expenses low
You can’t control how the markets will perform. You can control your investment expenses. Specifically:
- Mutual fund and ETF expenses.
- Trading costs at your custodian.
- The cost of financial advice
Revisit your investment strategy
I view market highs as a great time to revisit your investment strategy and your financial plan. If you’ve been fully and properly invested your portfolio has hopefully risen along with the markets.
Where does this leave you in terms of progress towards achieving your financial goals? This is a good time to revisit your financial plan.
The Bottom Line
Is Dow 18,000 a big deal? Not in my book and frankly I wonder if anyone besides the financial news media really cares. I suggest focusing on the details of your portfolio and your strategy and ignoring the hype.
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