DOW 20K – An Amazing Run, But Who Benefited?

“The Dow hit 20,000. The Queen of England turned 90 last year. Both are round numbers. Neither carry any real significance.” – Greg McBride, chief financial analyst at Bankrate

 In January, one of the world’s most renowned stock indexes, the “Dow Jones Industrial Average,” hit the much anticipated 20,000 mark. While this is a tremendous run since the low of 6,507.04 in March of 2009, most Americans weren’t willing to participate in the market over the past eight years. Per the Gallup chart below, the ownership of stocks by U.S. adults steadily declined for much of the bull market in U.S. Equities.

In fact, this trend only began to reverse after 2013, which happened to be the best year for the Dow since 1995!

Unfortunately, this is an all too common occurrence in the world of investing. When a bear market rears its ugly head, there is almost always a resultant lingering effect of risk avoidance from common investors. Conversely, when the market is rolling, or when psychological milestones are reached, market sentiment is sky high.

It’s important to remain level headed throughout entire market cycles. In our view, letting emotion drive investment decisions will certainly lead to inferior performance over the long run. Above all, maintaining a diversified portfolio that matches your personal level of risk is the one proven method of ensuring financial stability.

So, let’s celebrate Dow 20k for what it is – a cool round number. But let’s also use this moment as a reminder to stay the course when times get rough.

 

*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. No strategy assures success or protects against loss. Investing involves risk including loss of principal. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.