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FINANCIAL FOCUS What Does Dow 15,000 Mean to You ?
Tim Jones
Edward Jones Financial Advisor ( 678 ) 688-7536 1705 Williamson Rd Suite 103 Griffin , GA 30224
Article 3 — May 27 , 2013
This month , the Dow Jones Industrial Average hit a milestone , when , for the first time , it closed above 15,000 . Of course , 15,000 is a nice , round number , and it sounds pretty big — but what does it mean to you , as an individual investor ? Is it cause for celebration — or is it more of a “ caution ” flag ?
There ’ s no one simple answer to these questions . Since March 2009 — the low point of the market following the 2008 financial crisis — the “ Dow ” has risen about 130 percent . And while the Dow is just one index , it ’ s nonetheless an important measure of the market ’ s performance — which means that you were likely glad to see the 15,000 mark eclipsed and you ’ d be happy if the numbers just kept rising .
However , as you ’ re no doubt aware , the market does not move in just one direction . Typically , declines of 10 % or more — or “ corrections ” — occur about once a year . Unfortunately , they ' re not predictable . Sooner or later , the markets will indeed change course , at least for the short term . When this happens , don ’ t panic — corrections are a normal part of the market cycle . Still , you might feel like you should do something to cope with the downturn . But what ?
Here are a few suggestions : portfolio can become unbalanced — for example , following a long period of rising prices , some of your growth-oriented investments may have gained so much value that they now take up a larger percentage of your holdings than you had intended , possibly subjecting you to a greater level of risk than you desire . If this happens , you may need to scale back on these investments and reallocate the money elsewhere .
• Diversify — Always look for ways to spread your dollars among a range of vehicles — stocks , bonds , government securities , certificates of deposit ( CDs ) and other investments . Even within these classes , look for ways to diversify further , such as owning different types of stocks , bonds of varying maturities , and so on . Diversification can ’ t guarantee a profit or protect against a loss , but it can help reduce the impact of volatility that can occur in a downturn .
The Dow at 15,000 is certainly no minor event . And since stocks don ' t appear too expensive compared to their earnings , don ' t be surprised if higher milestones follow . But record highs can be quickly forgotten when the market falls . By being prepared for that day , too , you can help yourself continue to work toward your goals — even when the major market indices have , for the moment , taken a wrong turn .
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor .
• Keep investing — Too many people , when faced with a market drop , decide to “ cut their losses ” and take a “ time out ” from investing . But that can be a costly mistake — had these investors bailed out of the market in 2009 , and only recently returned , they would have missed a substantial part of that 130 percent run-up in the Dow . And when you invest in a down market , your dollars may actually go farther if the market rebounds , because you would have bought more shares at the lower prices .
• Review your portfolio — It ’ s usually a good idea to review your portfolio at least once a year , and it may be especially important during those times when the market changes directions . Over time , a