Don’t pay much attention to Dow’s daily fluctuations
Published: October 20, 2009
WASHINGTON Someone asked me if I was excited when the Dow once again hit the 10,000-point mark.
Nope.
It was October 2008 when we last saw that five-digit number. Now, on Oct. 14, the Dow Jones industrial average again closed above 10,000 -- 10,015.86 to be exact. Should we be cheering, or remain cautious about this recovery?
To find out, I interviewed some financial experts about this milestone.
"It is a true nonevent," said James R. Cotto, a senior vice president with Cotto & Padovani Wealth Strategies Group at Morgan Stanley Smith Barney. "It is nice that it is moving in the right direction, but it is relatively meaningless from a financial-planning perspective."
Dallas Salisbury, the president and chief executive of the Employee Benefit Research Institute, is not in awe.
"Extraordinary losses or gains should never excite the average individual investor in a positive way, as they underline the irrationality of the markets and the absence of any individual control over the markets," Salisbury said. "Winning or losing, it is more and more like being at a table in Las Vegas."
Salisbury said that now, more than ever, individual investors should be trying to decide how much they can afford to lose in the stock market and how much of their money needs to be safe and not subject to big swings in value.
Don Blandin, president and chief executive of Investor Protection Trust, had a similar caution.
"If you have been sitting on the sidelines since March because you have been scared to go in the water, don't think this week's ray of sunshine has warmed the surf much since the investment tsunami," Blandin said. "Investing and risk go hand in hand. Make sure you have learned or relearned the basics of saving and investing to make good decisions and protect yourself."
It's good for investors to have some recent and somewhat sustained relief from the wide and volatile swings of the past, said Syrinda Elizabeth Paige, a certified financial planner with the Lighthouse Group at Morgan Stanley.
"Investors should stay focused on knowing . . . what rate of return they need to live comfortably based on their own personal goals, their time horizon and expected expenditures," Paige said.
Ernest Burley, a certified financial planner with Burley Insurance and Financial Services based in Bowie, Md., is upbeat about the 10,000-point benchmark. But he said investors should be cautiously optimistic.
"I don't think there should be blind excitement and thoughts of being out of the woods and we're back to high returns again," Burley warned. "Enjoy it for what it is -- a current uptick in the market."
Burley said individual investors should see recent gains as another wake-up call that they have to have a financial plan. He says you should ask yourself three basic questions:
- What is the purpose of the money I'm investing?
- What is my time horizon?
- What is my risk tolerance?
"I don't think this upswing should prompt people to make changes to their portfolios based on the upswing," Burley said. "If a change is made, [it] should be based on making sure the money is properly allocated and diversified."
Michelle Singletary welcomes comments and column ideas but cannot offer specific personal financial advice. Readers can write to her c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071, or e-mail her at
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