Dow Jones Reaches All Time High


This will be a short post. Dow Jones reached all time highs this week. After it happened early in the week I was ready for a decline but it reached higher highs every day this week. I didn’t do anything to my portfolio and enjoyed nice gains in my index funds that I am invested in. It was also a dividend quarter and reaped $170 worth of dividends. Cash up!

New All Time Highs

This stock market rally isn’t like any other rally that has happened in the past. The world reeks of uncertainty with low oil prices, Brexit, and negative interest rates becoming globally popular. S&P earnings growth have also declined for a fourth straight quarter, yet the US stock market is on fire with no way of knowing what will put the fire out.

I’m more of an average investor in that I look more for the average returns I make over a long-term period and while I am afraid of a correction in the market looming soon with the current valuations in place, I won’t be changing my portfolio because I have no idea when the correction will happen.

You could deem the 1Q 2016 as the correction period, with a ~10% decline in the stock market and that this week acted as a bounce from that correction but it’s too hard to know because it’s a macroeconomic event that is hard to measure all of the specific details involved.

If you are looking for bullish signs, according to Tom Leveroni at Nautilus Research, when US market broke multiyear highs, it was followed by a period of prosperity. The market broke multiyear highs 17 times in the past and in those 17 times, the 1-year return was positive from when the all time highs happened.

So What?

What does this mean for you? If you are a long term investor, this means absolutely nothing. It shouldn’t change the behavior that you’ve been doing, such as saving 25-50% of your after-tax income, regularly investing in your 401k, and working hard.

In the bad times, people spend less and demand falters. In the good times, people spend more and demand picks up. Instead of only spending less when you know the economic conditions are bad, why not spend less before you know the economic conditions are bad to prepare?

This is the good times, the money should be flowing in, baby! Instead of looking for the material gratification with the cash, you should invest the extra flow of money for experiential gratification of early retirement. Experience trumps material possession for happiness anytime.

What Will I be Doing?

I, as a rule of thumb, never buy securities on a positive day and instead always look to sell on a positive day if I decide to sell. Therefore, I will be doing absolutely nothing to my portfolio and hoping the bull market will continue to the top! However, I know that’s impossible so the best I can hope for is for a drastic recession to not happen. Losing 30-40% of my net worth is scary to me because I’ve worked hand and foot for my money. Therefore, I will be doing anything I can do over-prepare for the situation.

My target savings rate for the upcoming year will be 40% of after-tax income. I know that it is achievable because I eat at my house every day after coming from work, spend about 25% less on rent than I did when I was in college, and have a higher income.

Disclaimer: I am not an investment advisor, please do your own research and none of what I posted above should be taken as investment advice.

Readers, what will you do with the all time highs? Are you changing your portfolio strategy, spending behaviors, or anything else? Let me know in the comments below!

Finance Solver

I grew my net worth to $40,000 as a college student through hard work, discipline, and a little bit of luck. I graduated college in 2016 and will be starting to plan for my retirement once I start working.I am planning on reaching financial independence by my early 30's and I will document my moments of inspiration all the way to desperation here.

My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!

Read more about me here.

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26 thoughts on “Dow Jones Reaches All Time High

  1. I also don’t plan on making drastic changes to my portfolio. I’ll just continue to dump money into my index funds on a monthly basis. In my opinion dollar cost averaging is the way to go as there’s just no way to time the market and know when the next recession will be.

    • Finance Solver says:

      That’s good, trading frequently can increase chances of being wrong. That’s what I’m planning on doing once I get some pay checks to work with. Hopefully the recession doesn’t happen anytime soon!

  2. Sounds like Wall Street is expecting improved earnings in the coming quarters. But like you said, it’s really anyone’s guess as to what will happen next. The upturn comes at a decent time for me since I’m liquidating a portion of my portfolio to invest in a small business with my siblings. But otherwise, I’m still invested for the long term and hoping for continued growth. Cash Up!

    • Finance Solver says:

      I think Wall Street is forecasting another quarter of declining earnings. But markets are increasing so obviously people are investing for other reasons. That sounds exciting. Trading a liquid security for a little bit more illiquid security should be a change of pace. Long term is the best, let the bull market rage on!

  3. I been waiting for bears for sometime but seem like it will forever be a bull market as long as the feds and other central banks need to print money to fuel the economy.

    • Finance Solver says:

      The interesting thing is Japan and some European countries have been doing QE to counter US’s QE but it hasn’t been working that well for them. I’m scared of that because the US can’t lead the world economy on its own because it’s a highly globalized country so it shares the ups and downs of its peer countries. Never had a situation like this before, hoping it turns out great for the consumers.

  4. I work for one of the companies in the DOW and have quite a bit of exposure to them through stocks I’ve gained through my ESPP. I plan on holding them long-term so I don’t really care right now whether we see a short-term drop. No plans on selling anytime soon.

    • Finance Solver says:

      That’s always a good idea. My 401k is going to be exposed to everything in the DOW (it could be S&P) because I’m investing 90% in the Market and 10% in bonds. As warren buffet bets, this portfolio allocation will surely beat any hedge fund returns over the long term. However, I still don’t like to buy at all time highs but it seems like I have no choice..

    • Finance Solver says:

      Ah always a great idea to pay off debt, it gives you guaranteed returns! I like to invest in boring but inevitable returns in the stock market because those boring returns are juicy!

  5. As someone who holds a very focused portfolio, I am re-assessing my individual securities and determining if I believe they are fairly valued at current prices. If so, I am going to liquidate into cash and hold tight as the market eventually corrects itself in the next year (or two; who knows when it will happen?). Additionally, as you mentioned, I will continue to work hard and contribute to my 401k!

    • Hmm.. If I may ask, what are some valuation metrics that you use? The hard part that I’m trying to learn more and more is the selling aspect of investing, I feel like I have a good idea of what to buy, but when to sell is hard. That’s awesome and is a recipe for success!

  6. Staying the course. Dollar cost averaging with every paycheck and keeping expenses low in mutual funds. I am going to look at re-balancing shortly, but that’s unrelated to the record highs. I always take a look around mid-year.

    • I will be staying the course as well and not selling. With a steady paycheck coming in starting next week, having a hard time justifying investing in the stock market right now, however. However, I believe in the average 7% return happening over the long term and will be banking on that.

  7. “Experience trumps material possession for happiness anytime.” I think once a person gets this one figured out, saving becomes much, much easier!

    As far as investing, we are currently staying the course, continuing to invest in the 401k each month. We stick with index funds as much as possible, though our options with the 401k are limited there. We also front load our IRAs each year – all sitting in VTSAX currently, with no plans to move that money. I have to say, as we near retirement, we are considering diversifying a bit (real estate), but that’s yet to be determined.

    • Finance Solver says:

      It’s a hard concept to grasp because having material possession is very marketed heavily to us but not impossible to figure out! That’s always a good choice, I am going to contribute my 401ks just tied to the market as well. Very worried about the hefty valuations however. or have great resources on turnkey properties! I want to get into real estate as well.

    • Finance Solver says:

      It’s been so hard to look for value these days because of the hefty valuations, but great job on finding needles in the haystack! I’m just going to invest in the S&P index and do nothing with it until I retire. Thanks for stopping by Tristan!

  8. Even though it’s frightening, at your age you WANT that massive drop soon so that you can accumulate even more earlier in your investing career.

    • Finance Solver says:

      That’s true, I’ve been telling that to my friends for the longest time but one thing I am worried about is that since I’m at the bottom of the totem pole in my job, if there’s a significant downtown, I don’t know how secure my job will be. We’ll see what happens!

  9. I do the same thing when the stock market drops as when it rises I buy. The only time I would sell is if a company or sector became so out of line it was hopeless.
    Now I did break those rules but one stock was an index fund and was now paying less than 1.5 percent when I bought it was paying close to 4.
    Another was a stock that payed irregular dividend.
    Non dividend stocks are fair game to sell besides those rules.

    • What’s interesting is that in finance classes or when just talking to people about it, a lot of people always ask “what did you buy” or “What’s your position” but I’ve NEVER heard people ask “when are you going to sell it?” or “what’s your exit strategy?” Majority of the time, buy and hold strategies work, but sometimes knowing when to sell is just as important as knowing when to buy!
      Dividend stocks are usually better than non-dividend stocks because they have to manage their cash very well. I think you’ve broken rules reasonably.

    • Finance Solver says:

      Ha, great strategy! It’s something that’ll never go out of style, that’s how my retirement fund accounts are set up.

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