Most 401k retirement
plans are invested in stocks, because it continues to be the only game in town
for growth. We invest in stocks to ensure that our gains are higher than
inflation. But since 2016 we’ve seen the Dow Averages increase from 18,000 to
25,000 and this increase isn’t over.
Most 401k plans are in
the S&P 500 Index. Those are the 500 largest companies by revenue. The Dow
is just 30 of these companies that are chosen to represent the overall economy
despite the fact that the S&P is a far better gage.
The DJIA is
a price-weighted index, which means stocks with higher share prices are given a
greater weight in the index. Instead of dividing by the number of stocks in the
average, as is done in an
arithmetic average, the sum
of the component stock prices is divided by a special divisor - .Jun 5, 2018.
The Dow will bounce up
and down, but 401K contributions tend to remain in stocks and this makes us
long-term investors. Day traders sell
high and buy low, but most of us are not day traders.
The history of the Dow
gives us an idea of how these 30 companies fared from 1915 to 2018. I recorded
the highs and lows below:
In February 1915, the
Dow stood at 1388.92.
In December 1915 the
Dow rose to 2430.07.
In July 1920 the Dow
dropped to 1054.01.
In September 1929 the
Dow rose to 5011.62.
In April 1932 the Dow
dropped to 1019.01.
In January 1937 the
Dow rose to.3325.30.
In April 1942 the Dow
dropped to 1444.99.
In January 1946 the
Dow rose to 2838.77
In January 1966 the
Dow stood at 7807.10
In July 1982 the Dow
dropped to 2093.47
In December 1999 the
Dow stood at 17245.68.
In March 2003 the Dow
dropped to 10,949.22.
In October 2007 the
Dow stood at 16827.45
In February 2009 the
Dow dropped to 8404.39
In January 2018 the
Dow stood at 26620.08
The 2008 Mortgage
Meltdown caused the Dow to drop in half and then recover as it has always
recovered.
In 1915, the US was
providing war material to our allies in World War I. In 1920, the US was recovering from entering
World War I. In 1929, the US economy had
done well and over-bought stocks. By 1932, the Great Depression was at its
height. By 1937, the US economy had improved. In 1942 the US was entering World
War II. In 1946, the US had won World War II and was beginning an economic
expansion. By 1966 the expansion was in full swing. In 1982, the US was recovering from high
inflation and recession. By 1999, the US economy had recovered and the cold war
had ended. In 2003 we were in the Middle East wars. By 2007, the economy had
recovered. In 2009 the Meltdown hit the Dow, but recovered within months of the
drop. In 2018, the Dow was reaching all-time highs in anticipation of the Trump
Presidency and economic recovery.
I expect some of the
current 30 Dow companies will level off and some will decline and be removed
like GE was this year.
Norb Leahy, Dunwoody
GA Tea Party Leader
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