RPF0410-DOW_at_20k
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00:00:14.880 | The Dow Jones industrial average has been flirting
00:00:19.580 | with 20,000 points
00:00:22.580 | for the last week or more,
00:00:25.620 | and it's got everybody quite tantalized.
00:00:30.040 | At the moment, just very much looking forward to that
00:00:33.720 | magic 20,000 point mark.
00:00:36.920 | As I record the show right now on January 11, 2017,
00:00:41.100 | it's at 19,954 points.
00:00:44.380 | I think it's doing this little 90/10 rule for coming in for a kiss.
00:00:49.300 | We've come in 90 percent and it's just simply sitting there and waiting,
00:00:53.960 | waiting, waiting to make up the other 10 percent.
00:00:59.640 | But here's the questions that matter, though.
00:01:02.960 | Number one, what does it mean for the Dow to be at 20,000?
00:01:06.560 | Number two, what does the Dow at 20,000 mean to you?
00:01:11.880 | And what should you do
00:01:16.560 | about a 20,000 point Dow Jones industrial average?
00:01:20.340 | But first, sponsor of the day today, number one is Paladin Registry.
00:01:24.340 | Hey, if you're listening to this and you don't already know
00:01:27.380 | what Dow Jones industrial average is and what it means for it to be at 20,000
00:01:32.440 | points, that might mean that you don't have a good financial advisor
00:01:36.380 | to talk to and call.
00:01:37.840 | And that might mean that you didn't already meet with a good financial advisor
00:01:40.760 | and ask them about that.
00:01:42.540 | Well, listen to the show.
00:01:44.960 | But as soon as we hang up the show, go to radicalpersonalfinance.com/paladin
00:01:48.540 | and start your search for your next great financial advisor.
00:01:53.080 | radicalpersonalfinance.com/paladin.
00:01:56.540 | Also sponsored by Personal Capital.
00:01:58.620 | Personal Capital is the best financial dashboard for you to use
00:02:02.920 | to see all of your accounts and all of your money and the performance in one spot.
00:02:07.040 | Because here's the deal.
00:02:08.700 | The Dow Jones industrial average
00:02:11.800 | doesn't tell you how much money you have or what the performance of your portfolio is.
00:02:15.800 | But Personal Capital can do that for you.
00:02:19.460 | Sign up for a free account at radicalpersonalfinance.com/personalcapital
00:02:25.540 | radicalpersonalfinance.com/personalcapital.
00:02:28.760 | Welcome to Radical Personal Finance, the show dedicated to providing you
00:02:47.960 | with the education and the insight
00:02:52.500 | that you need in order to live a rich and peaceful life now
00:02:56.040 | while building a plan for financial freedom in 10 years or less.
00:02:59.800 | My name is Joshua Sheets and I'm your host.
00:03:01.620 | Thank you for being with me.
00:03:02.800 | Going to work very hard on that education and that insight today
00:03:07.500 | on this thorny question of Dow 20,000.
00:03:10.760 | A lot of people out there making a lot of noise about Dow at 20,000.
00:03:21.640 | What's always funny about records in the stock market indexes
00:03:26.720 | and things like that is there's such a
00:03:29.980 | just a kind of a clashing of of ideas and opinions on what it means.
00:03:36.820 | I think of it like a place if you go out on a boat and when the tide is turning
00:03:41.320 | and you get two tidal currents where they meet, it's like these giant waves
00:03:45.060 | stand up where you get two currents that meet.
00:03:47.560 | It's just these big standing waves that sit there.
00:03:49.940 | And I think of Dow or Dow or any stock index records as that.
00:03:54.740 | You have on the one hand, you have the bulls and the other hand,
00:03:56.940 | you have the bears and you have the bulls.
00:03:58.700 | The bulls are excited about the fact that, hey, we're in new territory.
00:04:02.160 | We're in uncharted territory.
00:04:03.400 | The Dow at 20,000 points.
00:04:04.620 | Whoo, things are going up.
00:04:06.240 | Then you've got the bears.
00:04:07.120 | You're saying, oh, everything's going to be terrible.
00:04:09.120 | And in today's world of financial media, where there's such a diversity of opinion.
00:04:14.080 | I mean, the doom and gloomers are moaning and crying in their boots
00:04:17.860 | about Dow at 20,000, just saying it's the most obvious example
00:04:21.320 | of an overvalued market of all time.
00:04:23.820 | Obviously, the Dow is at 20,000 and the economy is terrible.
00:04:26.440 | So therefore, everything's a nightmare.
00:04:28.620 | And on the flip side, of course, you can make the opposite case.
00:04:31.120 | So what does it actually mean?
00:04:32.580 | Well, hard to boil all of the meaning down into one
00:04:38.540 | short, little succinct podcast, but I'm going to do my best.
00:04:42.120 | I want to start with just a little bit of background information,
00:04:45.080 | a little bit of insight.
00:04:45.880 | We're not going to try to do deep level financial analyst stuff.
00:04:48.720 | Just a little bit of information on what is the Dow Jones Industrial Average?
00:04:52.100 | Where does it come from?
00:04:52.980 | What does it actually mean?
00:04:54.140 | How does it work?
00:04:55.560 | What does 20,000 points mean?
00:04:57.980 | It's one of the most commonly known
00:05:00.720 | stock market indexes.
00:05:04.480 | My guess would be that if you were going to ask
00:05:07.600 | normal people to name a stock market index,
00:05:10.400 | most normal people would begin with listing off
00:05:14.820 | the Dow Jones Industrial Average.
00:05:17.000 | It's one of those things that's easily repeated.
00:05:18.900 | It's reported at newscasts all the time, every evening news for decades.
00:05:23.780 | Most people would probably have recognized Dow Jones Industrial Average
00:05:27.540 | far more than the S&P 500.
00:05:29.620 | And it's one of the oldest indexes that's ever been created.
00:05:33.260 | It was actually first calculated back in 1896.
00:05:37.720 | Been around for quite a while.
00:05:42.760 | Quick bit of history, the Dow Jones Industrial Average was named,
00:05:46.520 | it was first created by a man named Charles Dow,
00:05:50.400 | who was the co-founder of the Dow Jones & Company.
00:05:53.400 | He came up and started coming up with this idea of these indexes,
00:05:57.700 | and he created it together with one of his business associates,
00:06:01.240 | a statistician named Edward Jones.
00:06:03.820 | And the point of it was to calculate
00:06:07.120 | how this basket of stocks would perform
00:06:11.240 | so that they could have a metric to judge the performance.
00:06:15.000 | The Dow Jones Industrial Average is not the oldest index,
00:06:18.200 | it's actually the second oldest index.
00:06:20.580 | The first index that the Dow Jones & Company came up with
00:06:24.620 | was the Dow Jones Transportation Average.
00:06:27.540 | That was the first index that they created.
00:06:29.800 | And then they came up with this Dow Jones Industrial Average.
00:06:33.880 | Now, it was largely originally intended to be related
00:06:38.560 | and connected to heavy industry.
00:06:41.400 | Today, that's just kind of a historical misnomer
00:06:45.480 | because it does very little to do with heavy industry of any kind.
00:06:51.400 | The index was originally created with 12 stocks in it,
00:06:55.900 | and today it has about 30.
00:06:57.120 | Here are the companies that are currently in the Dow Jones Industrial Average.
00:07:02.960 | 3M, American Express,
00:07:06.500 | Apple Computer,
00:07:08.260 | Boeing,
00:07:09.600 | Caterpillar,
00:07:11.100 | Chevron,
00:07:12.640 | Cisco Systems,
00:07:14.560 | Coca-Cola,
00:07:16.060 | DuPont,
00:07:17.520 | ExxonMobil,
00:07:19.360 | General Electric,
00:07:21.140 | Goldman Sachs,
00:07:23.020 | The Home Depot,
00:07:24.740 | IBM,
00:07:26.160 | Intel,
00:07:27.660 | Johnson & Johnson,
00:07:29.540 | JPMorgan Chase,
00:07:31.580 | McDonald's,
00:07:33.420 | Merck,
00:07:34.700 | Microsoft,
00:07:36.540 | Nike,
00:07:38.000 | Pfizer,
00:07:39.580 | Procter & Gamble,
00:07:41.760 | Travelers,
00:07:43.340 | United Health Group,
00:07:45.140 | United Technologies,
00:07:47.140 | Verizon,
00:07:48.600 | Visa,
00:07:50.060 | Walmart,
00:07:51.560 | and finally, Walt Disney.
00:07:53.440 | Now, of course, you could see from those,
00:07:55.220 | Walt Disney is not a heavy industry company,
00:07:57.060 | neither is Walmart, Visa, Verizon,
00:08:00.100 | or practically most of these.
00:08:01.980 | So it's not an industrial average anymore.
00:08:04.780 | But the components of the Dow have been changed many times.
00:08:07.240 | A total of 51 times.
00:08:09.820 | But it's, you know,
00:08:12.240 | they've tried to keep the index reflective.
00:08:15.000 | The company that's been in there the longest
00:08:16.780 | was General Electric.
00:08:18.540 | They started being listed in the index in 1907,
00:08:22.780 | and here in 2017, 110 years later,
00:08:26.000 | they still continue to be in there.
00:08:27.760 | But at different times,
00:08:29.040 | they've taken different companies in and out of the index.
00:08:33.960 | So there are many attributes
00:08:36.600 | to the Dow Jones Industrial Average
00:08:38.020 | that cause financial people
00:08:40.560 | and financially knowledgeable people
00:08:42.060 | to discount its importance.
00:08:44.220 | But it's not to say it's unimportant.
00:08:46.480 | It just has some significant features
00:08:49.740 | that make it very troubling,
00:08:51.900 | or not the most useful.
00:08:54.000 | There are other indexes that are much more useful.
00:08:56.820 | Probably the biggest thing that you should be aware of
00:08:59.700 | in the Dow Jones Industrial Average
00:09:01.880 | is that it is what's called a price-weighted index.
00:09:06.880 | This means that the most important factor
00:09:10.260 | in calculating the impact
00:09:11.760 | of the various up and down movements of the stocks
00:09:14.640 | of the companies that are used
00:09:16.220 | in calculating the Dow Jones Industrial Average
00:09:18.600 | is their price.
00:09:20.440 | Meaning price is measured in dollars per share.
00:09:26.720 | So if you have a stock that is $20 per share,
00:09:31.720 | and that moves up by one point from $20 to $21 per share,
00:09:36.720 | then that will move the Dow Jones Industrial Average
00:09:41.980 | up by one point.
00:09:44.140 | If you have a stock that's $80 per share
00:09:46.180 | and it moves up from $1, from $80 to $81,
00:09:49.940 | that'll move the Dow Jones Industrial Average
00:09:51.700 | up by one point.
00:09:53.360 | Now, if it were all as simple as that,
00:09:56.100 | it's not, I'll get to that in just a moment,
00:09:57.300 | but if it were all as simple as that,
00:09:58.880 | you could immediately start to see
00:10:00.300 | some of the potential problems of this structure.
00:10:05.200 | So pretend it's as simple as a dollar,
00:10:07.340 | for every dollar that the share price changes,
00:10:10.200 | that changes the average by one point.
00:10:13.740 | You can see here that you don't get any insight
00:10:17.360 | into how large any particular company is
00:10:20.340 | or how many shares of stock that a company has.
00:10:23.380 | See, you could have a company that has 10 shares of stock
00:10:26.120 | at $10 a piece, or you could have that same exact company
00:10:29.900 | could issue 20 shares of stock at $5 a piece,
00:10:33.100 | and the company would get exactly
00:10:34.660 | the same amount of revenue.
00:10:35.900 | You as an investor could buy the same value of the shares,
00:10:39.260 | you just have a slightly different number.
00:10:40.940 | And there are different reasons why some companies
00:10:43.700 | will have stock prices that'll trade at lower dollars
00:10:46.740 | and some companies will have stock prices
00:10:48.820 | that'll trade at higher dollars.
00:10:50.380 | You famously have the share prices of something like a stock
00:10:54.660 | like Berkshire Hathaway, which is tens of thousands
00:10:57.180 | and now over $100,000, or you might have companies
00:11:00.980 | that are down on their, considered to be penny stocks
00:11:02.940 | that are super cheap.
00:11:03.760 | So the share price can change dramatically,
00:11:06.140 | and it's not so much the actual share price
00:11:08.140 | that is important as the value of the company.
00:11:10.680 | But the value of the company,
00:11:11.900 | that's called the market capitalization, market cap,
00:11:15.500 | is not reflected in the price of the stock,
00:11:20.420 | nor is it reflected in the Dow Jones Industrial Average.
00:11:24.440 | So you can also see here that if you have a company
00:11:27.340 | that is very strong, but is moving from $80 in value
00:11:32.340 | to $81 in value, that's a much smaller percentage move
00:11:38.740 | than a company that's $20 in value
00:11:41.740 | and moving from $20 to $21 in value.
00:11:44.660 | So this price weighting methodology
00:11:46.920 | has some substantial problems with it.
00:11:50.140 | Now, before I go on, the Dow is not today,
00:11:54.340 | as simple, it's not the 30 companies
00:11:57.340 | and the price of their shares calculated out
00:11:59.960 | and multiplied out to equal
00:12:01.580 | the Dow Jones Industrial Average.
00:12:03.680 | What's happened over the years
00:12:04.880 | is that there are all kinds of changes
00:12:06.040 | that have had to be made to the index
00:12:07.640 | in order to keep it functioning.
00:12:08.960 | When it was originally built with those 12 stocks,
00:12:11.320 | it was that simple.
00:12:12.940 | You just take the total price divided of all the stocks,
00:12:16.960 | divided by 12, and that would be
00:12:18.200 | the Dow Jones Industrial Average.
00:12:19.760 | But today, because of all of the stock splits
00:12:21.780 | and the spinoffs, and sometimes new stocks come in
00:12:24.320 | and new stocks go out,
00:12:25.560 | they have to consistently update the divisor,
00:12:28.200 | the number that is actually pulled in.
00:12:31.160 | And the divisor is changed constantly.
00:12:34.680 | It's varied all over the place in terms of the price.
00:12:38.240 | It was, the divisor in 1928 was at 16.67 points,
00:12:43.240 | so you would take all the prices of the stocks
00:12:45.960 | of the 30 companies and multiply it up,
00:12:47.480 | divided by 16.67, and it's very, very low now.
00:12:52.320 | I don't have the current one in front of me,
00:12:54.260 | but it's like 0.13 something, blah, blah, blah.
00:12:59.260 | It's published in the Wall Street Journal.
00:13:02.520 | So this number is what's calculated in
00:13:06.600 | to wind up being the 20,000 point number
00:13:10.860 | of the Dow Jones Industrial Average.
00:13:12.480 | But that price weighting thing is a real problem.
00:13:15.040 | It means that companies don't necessarily have
00:13:17.560 | the influence that the size of the company would indicate.
00:13:24.160 | Here's just one example from a Bloomberg article
00:13:27.240 | from today that makes the point here.
00:13:31.600 | The Dow Jones Industrial Average has climbed about 13%,
00:13:36.240 | or 2,250 points, since the end of 2015.
00:13:41.120 | Its four best performers, all rising a similar amount,
00:13:45.120 | added about 1,000 points between them.
00:13:49.240 | But look at the distribution of those points.
00:13:51.960 | A 30% gain in $309 billion JP Morgan,
00:13:56.720 | again, $309 billion JP Morgan,
00:14:00.780 | was only good enough for 136 points.
00:14:03.800 | I'm gonna read that again just in case
00:14:06.640 | you're driving down the road, pay attention to the numbers.
00:14:08.440 | A 30% gain in $309 billion JP Morgan
00:14:13.360 | was only good enough for 136 points,
00:14:17.160 | while $101 billion rival Goldman Sachs
00:14:21.480 | contributed 415 points with a 33% increase.
00:14:27.960 | So Goldman Sachs, a company that's a third of the size,
00:14:32.840 | contributes 415 points with a similar increase in value
00:14:36.440 | as compared to JP Morgan.
00:14:39.520 | The best performer in the index, Caterpillar,
00:14:41.680 | rose 37% and contributed 172 points.
00:14:47.680 | Despite having a market capitalization of $55 billion.
00:14:51.740 | Size doesn't matter in the Dow.
00:14:56.000 | That's a real problem.
00:14:57.200 | So it's a good example here just to show
00:15:00.200 | how big of a deal this is, which is why generally,
00:15:05.960 | financial advisors don't pay much attention to the Dow
00:15:08.800 | in their portfolios or anything,
00:15:11.060 | it's more of a historical thing,
00:15:13.120 | and the public likes it than just about anything else.
00:15:16.120 | Here's another paragraph from that article.
00:15:18.840 | They said, "Want to get the Dow above $20,000?
00:15:21.400 | Example, time for an experiment.
00:15:23.520 | Let's take $153 billion Cisco,
00:15:28.520 | which has the lowest stock price in the Dow,
00:15:32.040 | and see what happens when it's replaced.
00:15:34.960 | Here's what the Dow would look like
00:15:36.880 | when a selection of worthy constituents,
00:15:39.880 | $18 billion Campbell Soup."
00:15:42.400 | So there's a chart,
00:15:45.520 | so I obviously had to read it to you.
00:15:46.840 | "$18 billion Campbell Soup,
00:15:49.100 | $37 billion Emerson Electric,
00:15:51.960 | or even $10 billion Harley-Davidson are added.
00:15:55.240 | It takes all of those over at 20,000.
00:15:57.400 | So any one of those companies,
00:15:59.560 | you can swap out $153 billion Cisco,
00:16:02.080 | swap in $18 billion Campbell Soup,
00:16:04.600 | $37 billion Emerson Electric,
00:16:06.760 | or $10 billion Harley-Davidson,
00:16:08.820 | and boom, you're over 20,000.
00:16:11.360 | Just don't replace it with $76 billion price line,
00:16:14.680 | 'cause that'll take all the fun out of Dow 30,000.
00:16:17.040 | You're immediately at Dow over 30,000
00:16:19.040 | if you just swap in price line."
00:16:20.680 | So hopefully you get the idea.
00:16:23.360 | The point is that for actual analysis,
00:16:25.440 | it's not particularly useful.
00:16:27.480 | Now, does it matter?
00:16:28.760 | Yes, it does matter.
00:16:31.440 | Probably the best thing about the Dow
00:16:32.840 | is just simply how old it is.
00:16:34.440 | Because the Dow is so old,
00:16:36.320 | you can go and you can take this consistent methodology
00:16:38.920 | and you can clearly chart the growth of the American economy,
00:16:43.760 | the growth of the companies
00:16:45.400 | that have been involved in the Dow.
00:16:46.880 | It gives you a good indication of the direction
00:16:48.880 | of the value of the share prices of the companies.
00:16:51.200 | It's also important simply because it's always out there.
00:16:56.200 | It's always out there in the news.
00:16:58.760 | And it indicates the direction of the markets.
00:17:03.760 | So certainly the Standard & Poor's 500 and NASDAQ
00:17:09.720 | are much better indexes to watch.
00:17:12.500 | But you'll see that these generally move together.
00:17:15.280 | And so the S&P 500 and NASDAQ
00:17:18.120 | are also at or near their own all-time highs.
00:17:21.440 | So the Dow is definitely an index that sends a signal.
00:17:26.440 | It's definitely something that people will notice.
00:17:31.520 | When it goes over 20,000, it will be news.
00:17:34.760 | It'll be front page news.
00:17:36.560 | You'll see it in the news.
00:17:37.920 | You'll see it on the websites.
00:17:39.000 | You'll see it on social media, et cetera.
00:17:41.080 | You'll see people crowing about it.
00:17:43.680 | You'll see it as attributed to all kinds of people.
00:17:45.860 | President Obama's final victory of his administration.
00:17:50.700 | You'll see people moaning about it.
00:17:52.580 | It's the signal of the end of the world as we know it.
00:17:54.920 | But you'll certainly see the 20,000 mark talked about.
00:17:59.920 | It is going to matter.
00:18:02.300 | So that's what the Dow is.
00:18:04.420 | And the answer to it is yes, it does matter.
00:18:06.360 | Now let's get more personal.
00:18:08.080 | Let's talk about what should the Dow at 20,000 mean to you
00:18:12.920 | and then what should you do about it
00:18:15.480 | in your own personal investments
00:18:17.460 | and your own personal financial life.
00:18:20.380 | First, what should it mean to you?
00:18:24.200 | Well, it should mean in some ways very little to you
00:18:28.960 | because you should be watching your money,
00:18:32.320 | not other people's money.
00:18:34.660 | So yes, Dow Jones Industrial Average at 20,000
00:18:37.200 | is a social signal.
00:18:40.280 | It's gonna play into the tenor around you
00:18:42.760 | and that does matter.
00:18:44.120 | But the more important factor would be
00:18:46.520 | what's your personal index?
00:18:48.120 | What's your personal performance?
00:18:49.920 | How is your portfolio doing?
00:18:52.460 | Those are the numbers that matter
00:18:53.800 | because you can't spend the Dow Jones Industrial Average,
00:18:57.280 | but you can spend the money in your accounts.
00:19:01.120 | And so this should be a signal to you
00:19:03.360 | to stop and to look at your accounts
00:19:06.620 | and to see, well, how am I doing?
00:19:11.380 | Am I at record highs?
00:19:14.400 | Is my portfolio at record highs?
00:19:16.720 | How's the performance of my portfolio?
00:19:18.640 | Perhaps pull up a chart
00:19:19.680 | of the Dow Jones Industrial Average performance
00:19:22.000 | and compare that to your performance
00:19:23.520 | and see how things rank up.
00:19:25.560 | That's what it should mean to you.
00:19:29.080 | It should be a signal.
00:19:30.180 | Because beyond the fact
00:19:33.080 | that the Dow Jones Industrial Average
00:19:34.600 | simply has psychological effects on the population
00:19:36.900 | of the United States and the world and on stock traders,
00:19:40.020 | it doesn't mean anything to you.
00:19:42.160 | It doesn't affect your life.
00:19:44.140 | But your portfolio affects your life.
00:19:48.820 | Your portfolio is what you can actually spend.
00:19:53.560 | Your portfolio is what will determine how wealthy
00:19:57.020 | or poor you wind up being in the future.
00:19:59.160 | You need to pay careful attention
00:20:02.260 | to the emotions that you feel.
00:20:04.480 | Many people will feel an emotion about,
00:20:08.080 | "Hey, I'm at Dow 20,000.
00:20:09.900 | "This is the top, this is the end.
00:20:11.160 | "It's all gonna go down from now."
00:20:12.820 | You need to handle that emotion.
00:20:15.820 | Many people will feel the emotion of the opposite.
00:20:21.700 | "Dow was great.
00:20:24.400 | "Hey, the times are good.
00:20:25.300 | "Let me go ahead and put more money in."
00:20:27.280 | Both of these emotional reactions need to be tempered
00:20:30.680 | by careful analytical thinking
00:20:33.680 | and careful reevaluation of your goals.
00:20:38.680 | More on this in a moment,
00:20:39.680 | but the reason I chose these two sponsors for today's show
00:20:42.400 | is because they fit in so perfectly.
00:20:44.520 | Again, Personal Capital, Paladin Registry.
00:20:47.120 | Personal Capital, what you should do about Dow 20,000
00:20:50.440 | is go right over to your Personal Capital dashboard,
00:20:53.040 | which of course you'll download it first.
00:20:55.120 | Sign up for free at radicalpersonalfinance.com/personalcapital.
00:21:00.360 | Totally free.
00:21:01.440 | You'll go into Personal Capital
00:21:02.800 | and you'll do just like you do on other banking things.
00:21:05.560 | You'll put in your banking information
00:21:07.360 | and you'll connect all your accounts.
00:21:09.000 | And then boom, Personal Capital will give you
00:21:11.140 | this beautiful dashboard of all of your accounts.
00:21:13.920 | If you have banking accounts,
00:21:14.920 | you'll see all the banking data.
00:21:16.360 | If you have investment accounts that you've linked up,
00:21:18.320 | you'll see all of that investment data.
00:21:19.720 | And you can start to look through some of the analytics
00:21:22.040 | and some of the metrics and start to track
00:21:24.000 | the performance of your actual portfolio.
00:21:26.080 | They've done a wonderful job opening up these metrics.
00:21:30.880 | That's to me one of the biggest values of Personal Capital.
00:21:34.440 | Yeah, they've got the budget tracking stuff,
00:21:36.760 | but I think their proactive budgeting stinks.
00:21:39.980 | It's the same as anybody else.
00:21:41.560 | But their dashboard is beautiful
00:21:43.640 | and they've got great insights on investments.
00:21:45.940 | So that would be the first place that I would go
00:21:47.840 | is go over to my Personal Capital account,
00:21:49.480 | pull things open and take a look.
00:21:50.800 | And let's just review.
00:21:52.280 | Are my account balances at record numbers?
00:21:54.400 | How's my net worth statement?
00:21:56.020 | We just finished up January 1, 2017.
00:21:59.080 | How much did your net worth grow in the last calendar year?
00:22:01.680 | All of these questions are questions that you can answer
00:22:04.720 | simply by using the Personal Capital,
00:22:07.200 | Personal Finance tools.
00:22:08.680 | That again, sign up for free, use my link.
00:22:11.280 | Please use my tracking link so I get credit for your visit.
00:22:14.040 | Go to radicalpersonalfinance.com/personalcapital
00:22:17.920 | and sign up for a free account there.
00:22:19.260 | Link all your accounts and then start tracking your net worth,
00:22:22.640 | start using it to track your investment performance.
00:22:25.340 | Then also Paladin Registry.
00:22:26.720 | Paladin Registry again is a registry service
00:22:29.120 | for vetted financial advisors.
00:22:31.040 | So if you're looking for a financial advisor,
00:22:32.780 | you can go down the street to the financial district
00:22:35.400 | and walk into some offices.
00:22:36.960 | You can go through the phone book
00:22:38.280 | or go online and start looking.
00:22:40.920 | The challenge is that there's no way to know
00:22:43.400 | if that advisor has been screened
00:22:46.180 | on any circumstances whatsoever.
00:22:48.920 | So what you've gotta do is you've gotta start
00:22:51.600 | by going through and screening financial advisors.
00:22:54.920 | Well, if you start with Paladin Registry,
00:22:56.600 | you can cut that process short
00:22:57.960 | because Paladin Registry, the founder Jack Wehmeyer,
00:23:00.680 | built this screen of 15 different points
00:23:02.760 | and they will go in and start to focus
00:23:05.640 | and they've pre-selected the financial advisors.
00:23:08.320 | So you may or may not be able to find somebody
00:23:11.420 | that works with your personality,
00:23:12.840 | that you feel really gets you and gets your goals.
00:23:15.080 | But at least you can be confident
00:23:16.260 | that you're talking to people who are honest,
00:23:21.260 | who have ethical backgrounds,
00:23:23.320 | and who are knowledgeable in the personal finance
00:23:25.260 | and investing space.
00:23:26.680 | So find a great financial advisor
00:23:28.800 | 'cause you should have, hey,
00:23:29.720 | if you got questions about Dow 20,000,
00:23:31.240 | you probably should have started there.
00:23:32.560 | Find a great financial advisor
00:23:33.680 | at radicalpersonalfinance.com/paladin,
00:23:36.520 | radicalpersonalfinance.com/P-A-L-A-D-I-N.
00:23:41.320 | Now, back to emotions.
00:23:43.520 | Anytime the markets hit highs and lows,
00:23:46.440 | you should carefully look at and think about
00:23:49.480 | and consider and analyze your personal emotions.
00:23:54.400 | If you find yourself right now
00:23:55.640 | extremely nervous about your investments,
00:23:59.040 | you need to sit down and talk
00:24:00.560 | with your financial advisor about your nervousness.
00:24:03.520 | Are you nervous that the market's gonna fall apart?
00:24:07.660 | If so, pay attention to that.
00:24:13.000 | Because if you don't understand your nervousness
00:24:15.680 | and you don't pay attention to it,
00:24:17.200 | it'll be very easy for you to succumb
00:24:20.200 | to an emotional decision in the future.
00:24:22.320 | Now, stock market investing may or may not be right for you
00:24:25.580 | and your portfolio may or may not be right for you.
00:24:28.200 | Not every, in my opinion, not everybody should own stocks.
00:24:32.200 | I don't buy the line that everybody should own stocks,
00:24:35.500 | everybody should own mutual funds.
00:24:37.140 | Guess what?
00:24:37.980 | There are lots of rich people in your town
00:24:39.340 | who got rich and never owned stocks.
00:24:41.180 | And what many of them have learned
00:24:42.580 | is they simply didn't have the temperament
00:24:44.740 | to handle the ups and downs of the stock market.
00:24:47.140 | And so they wisely pointed their finger
00:24:49.100 | at the people who were in the stock market.
00:24:51.500 | They pointed their focus in a different direction.
00:24:54.400 | Now, obviously, I'm here to seek to educate you
00:24:58.620 | on what numbers mean, what stocks mean, et cetera.
00:25:03.620 | Your financial advisor is there to educate you
00:25:06.960 | on what these things mean.
00:25:08.840 | But the point of it all is simply that
00:25:11.220 | you need to understand for yourself
00:25:15.000 | what's true and what's not and what works for you.
00:25:21.600 | Now, a couple of comments on kind of what's going on
00:25:24.040 | with Dow 20,000.
00:25:26.040 | There are definitely some political winds
00:25:30.260 | that are blowing, in my opinion,
00:25:32.640 | definitely some political winds that are blowing the Dow.
00:25:36.400 | And we should pay attention to that.
00:25:39.080 | I think that with the election of Donald,
00:25:44.080 | President-elect Donald Trump,
00:25:46.340 | that changed the financial markets.
00:25:47.960 | And he certainly has been making many more overtures
00:25:52.960 | toward the world of finance,
00:25:56.320 | focusing heavily on pro-growth policies.
00:26:00.680 | He's promised to be the greatest jobs president that,
00:26:03.760 | he said, "I'm gonna be the greatest jobs president
00:26:06.480 | "that God ever created."
00:26:07.440 | I think that's his quote. (laughs)
00:26:11.000 | I didn't know that God created jobs presidents.
00:26:13.400 | But who knows?
00:26:16.400 | Who knows, maybe he will be.
00:26:18.160 | But he's very, very focused on seeking to build up
00:26:21.080 | and grow jobs and to stimulate the economy.
00:26:25.920 | Of course, you have to ask the question,
00:26:27.360 | and the libertarian free market guy in me
00:26:30.120 | wants to always ask, okay,
00:26:31.440 | what impact does the president actually have?
00:26:33.720 | But at the very least, the president makes a signal.
00:26:36.480 | And Wall Street has been thoroughly happy
00:26:39.600 | with the election of President-elect Trump
00:26:42.040 | in terms of the signals that he's sending.
00:26:44.280 | There's also probably just the fact
00:26:46.320 | that you have a Republican majority in the House,
00:26:50.280 | you have a Republican majority in the Senate,
00:26:51.960 | and you have Republican presidents.
00:26:54.880 | That is a remarkable, well, it's a remarkable move.
00:26:59.400 | So what it means is that the Republicans,
00:27:01.200 | if they are able to work effectively together,
00:27:03.320 | will probably be able to pass more bills
00:27:07.280 | than past Congresses, where the Congress and the president,
00:27:11.960 | the legislative branch and the executive branch
00:27:15.240 | are at loggerheads with one another.
00:27:16.960 | So time will tell.
00:27:18.680 | Certainly had an impact.
00:27:20.160 | Now, the question, of course, is do politics
00:27:23.920 | determine the direction of your portfolio?
00:27:26.640 | And this is the biggest thing that often frustrates me
00:27:30.200 | that when I read articles and analysis that people make
00:27:33.920 | is people often assume that the country
00:27:38.040 | is synonymous with the companies in the country.
00:27:41.000 | So for example, the United States
00:27:43.640 | has extremely difficult financial problems
00:27:46.840 | in terms of large debts,
00:27:51.200 | and especially large debts
00:27:53.640 | that are not generally reported on the books,
00:27:56.600 | commonly called unfunded liabilities.
00:27:59.000 | You have problems, major problems,
00:28:00.760 | with Medicare, Medicaid, Social Security,
00:28:03.120 | accounts for 50% of the budget of the United States
00:28:08.120 | and just a massive financial boondoggle.
00:28:12.480 | Totally underfunded, depending on the number that you use.
00:28:15.600 | You were talking hundreds of trillions of dollars.
00:28:18.760 | I use the number about $220 trillion.
00:28:21.360 | I cite Professor Kotlikoff from Boston University,
00:28:24.780 | but whatever, they're different estimates and who knows.
00:28:27.520 | This is not the current debt.
00:28:28.960 | This is not the current debt as expressed
00:28:30.520 | as a percentage of GDP.
00:28:31.960 | It's just a significant problem.
00:28:33.520 | But the question is, is that problem solvable
00:28:37.280 | and does that problem have to be solved by the companies?
00:28:42.120 | I think this is one of the constant things that I see,
00:28:43.960 | that companies and countries are different entities.
00:28:47.480 | You can't look at those companies
00:28:49.080 | that are in the Dow Jones Industrial Average
00:28:50.680 | and think that the only influence on them
00:28:55.000 | in terms of their profits
00:28:56.960 | is just how the American economy performs
00:28:59.840 | or what the American government does.
00:29:01.800 | You have Apple Corporation and Boeing Corporation,
00:29:04.360 | Coca-Cola.
00:29:05.800 | Are these companies entirely reliant
00:29:09.040 | on what the US government does or doesn't do
00:29:13.960 | or the financial fiscal problems of the US government?
00:29:17.860 | No, they have massive global enterprises,
00:29:20.320 | huge, massive global enterprises.
00:29:23.520 | And so thus, you always have to dig down
00:29:25.880 | a little bit deeper and say, how does my company work?
00:29:28.580 | Where does the revenues come from for my company?
00:29:31.640 | What are the factors that are gonna influence my profits
00:29:35.840 | at the end of the year?
00:29:38.240 | That's the type of analysis that will make a difference.
00:29:40.840 | No question, the President of the United States
00:29:42.700 | will have an impact on the company.
00:29:45.120 | And these poor companies that get called out
00:29:46.880 | and President-elect Trump's tweets
00:29:48.880 | or in his speeches this afternoon,
00:29:51.200 | he recorded his press conference
00:29:52.600 | and he started talking about pharmaceutical companies
00:29:54.800 | and all the pharma stocks went down
00:29:56.800 | or Boeing got hammered and their stock got hammered
00:30:00.040 | because he got called out on the new Air Force One project.
00:30:03.400 | So certainly these companies are affected,
00:30:05.340 | but these are blips.
00:30:06.980 | These are small blips on the radar screen
00:30:11.980 | in terms of the actual performance of the company.
00:30:14.960 | So always remember,
00:30:16.080 | companies and countries are not the same thing.
00:30:18.800 | Second, always remember,
00:30:20.400 | companies have the ability to change.
00:30:23.220 | Some quickly, some slowly,
00:30:27.320 | but companies have the ability to change.
00:30:30.240 | Companies, even including the large ones,
00:30:32.800 | though they face many problems with massive bureaucracy,
00:30:36.020 | they face many advantages due to their size
00:30:39.560 | and they can change.
00:30:40.680 | And they're staffed by smart men and women
00:30:43.560 | who are looking at all the same information that you are
00:30:46.440 | and seeking to understand how do we gain more customers,
00:30:49.160 | how do we build more profits,
00:30:50.680 | and how do we make sure
00:30:51.960 | that we return profits to our owners?
00:30:54.640 | That's what they're doing.
00:30:55.640 | And they can change.
00:30:57.200 | They can change from the top to the bottom.
00:30:59.080 | They can change all kinds of things.
00:31:02.120 | Now, obviously, they're not all gonna change for the better.
00:31:04.720 | Sometimes they're gonna make mistakes,
00:31:06.500 | but they can change.
00:31:08.460 | And companies can change and adapt their business model
00:31:11.900 | to face a changing world.
00:31:13.700 | So important to always keep that in mind.
00:31:17.660 | No matter what the laws do,
00:31:19.620 | no matter what legal changes come about,
00:31:23.220 | no matter what the Federal Reserve Board does,
00:31:26.060 | a company has the ability to change,
00:31:29.740 | change its operations.
00:31:31.320 | Yeah, I had an interesting experience thinking about it.
00:31:34.460 | There's a lot of fuss in the previous election cycle
00:31:39.080 | about the potential changes of minimum wage laws.
00:31:43.260 | And long-time listeners of the show know
00:31:45.460 | I'm emphatically opposed to minimum wage laws.
00:31:48.300 | I think they're discriminatory, and they hurt workers.
00:31:51.420 | They do nothing but drive down employment,
00:31:54.980 | and they hurt the people who can afford to be the least hurt.
00:31:59.260 | Minimum wage laws hurt the poor.
00:32:01.220 | They hurt the uneducated.
00:32:02.880 | They hurt many of the young.
00:32:05.300 | And so they're a terrible idea, in my opinion.
00:32:08.100 | That comes from a profoundly deep free market conviction,
00:32:12.980 | and the profound belief in the ability of two individuals
00:32:17.020 | to come together and strike whatever voluntary contract
00:32:19.780 | they wanna strike with one another.
00:32:21.860 | But that's a politically unpopular opinion.
00:32:24.860 | It's politically popular to say,
00:32:27.420 | well, we need to pay a working wage.
00:32:28.940 | Well, who knows?
00:32:29.780 | Who knows if I'm right?
00:32:30.600 | Who knows if other people are right?
00:32:31.760 | But there was a lot of hullabaloo about a minimum wage
00:32:35.220 | and raising the minimum wage.
00:32:37.420 | Well, I've predicted for a long time and have observed
00:32:40.240 | that if you lobby for a higher minimum wage,
00:32:43.980 | all you're lobbying for is your employer to work harder
00:32:47.660 | on finding a cheaper replacement for you.
00:32:50.080 | So you'd better be careful.
00:32:53.260 | And one of the biggest changes that I have seen
00:32:55.440 | is many of the minimum wage type jobs,
00:32:58.460 | especially service-related jobs, are in jeopardy.
00:33:01.060 | This has happened slowly.
00:33:02.780 | But cashier services, for example.
00:33:05.700 | In the beginning, when self-checkout lanes first came open,
00:33:09.720 | they were a little bit frustrating to use.
00:33:11.240 | They didn't work all that well.
00:33:12.800 | And so many people chose to go and work with the cashier.
00:33:16.160 | So stores came out with just one or two lanes.
00:33:19.440 | But I have observed that more and more,
00:33:21.260 | self-checkout lanes are much more popular.
00:33:23.720 | I personally often use the self-checkout lane
00:33:26.400 | 'cause it moves quickly.
00:33:28.200 | I can move quickly as long as people in front of me
00:33:30.600 | are working, the payment systems are working faster.
00:33:33.360 | Just the whole process has been streamlined.
00:33:36.080 | There is a lot of fuss in the fast food working industry
00:33:38.720 | about the minimum wage.
00:33:40.120 | And I predicted for several years
00:33:43.040 | that the fast food industry would replace
00:33:47.240 | the frontline workers with a computerized system.
00:33:50.280 | And there may be different applications of this.
00:33:52.760 | You can see this happening with ordering
00:33:54.560 | on an app on your phone.
00:33:56.200 | The technology is completely perfectly there
00:33:58.920 | where a company can use a geolocation on your phone
00:34:03.920 | with your restaurant's application.
00:34:06.480 | You can pay, you can do it all right
00:34:08.520 | through the payment systems on the phone.
00:34:10.140 | You can just pick up, walk in, put the order on your phone
00:34:13.320 | and you walk in and pick up the bag.
00:34:14.560 | Or you can use the kiosk.
00:34:16.080 | Well, for the first time this last two weeks ago
00:34:19.680 | when I was on vacation, I was up in Georgia,
00:34:21.520 | and I saw for the first time a McDonald's
00:34:23.480 | that had kiosks, ordering kiosks,
00:34:26.920 | where instead of going up to the counter
00:34:28.560 | and giving your order to the person behind the counter,
00:34:30.920 | you could just simply punch the info in the computer.
00:34:34.120 | Same thing is coming.
00:34:35.520 | So that's gonna come and it's gonna spread
00:34:37.920 | and be the majority of the ordering systems in the future,
00:34:41.400 | in my opinion.
00:34:42.220 | Who knows?
00:34:43.120 | Again, I could be wrong, but that's my prediction.
00:34:45.360 | Because I would probably rather deal with a kiosk
00:34:47.920 | than deal with a person,
00:34:49.360 | especially a person who doesn't bring any value
00:34:51.800 | and who winds up being more frustrated,
00:34:53.700 | frustrating to interact with
00:34:56.600 | because of poor customer service,
00:34:57.880 | at least with a computer I know what I'm gonna get.
00:34:59.920 | So that represents, my point is that
00:35:01.840 | that represents an indication, a current trend
00:35:04.240 | that you can watch and see in your own experience
00:35:07.240 | of how companies will adapt and will change
00:35:10.000 | based upon legislation and based upon economic environment.
00:35:13.920 | If wages were, if a company could pay $2 an hour
00:35:19.920 | to a worker to take orders,
00:35:22.240 | they would have almost no incentive to bring on computers,
00:35:27.400 | my guess, I haven't researched all of their books.
00:35:29.880 | But there is a point, however,
00:35:31.560 | at which the labor costs become so high
00:35:33.720 | and then the person is replaced by a computer.
00:35:36.600 | So companies have the ability to make that change.
00:35:39.080 | That's very different than governments.
00:35:41.520 | Friend of mine, longtime political reporter
00:35:44.840 | and has talked about a lot about Washington
00:35:48.320 | and just tells me some of the stories
00:35:50.200 | and the rules and things that are in place
00:35:52.160 | on federal workers and the federal government.
00:35:54.200 | It's almost impossible to get rid of people.
00:35:56.180 | Well, companies will work their way through that.
00:35:59.480 | So don't associate governments and companies too tightly.
00:36:03.840 | Yes, they influence each other.
00:36:05.480 | Yes, they both matter, but they are not synonymous.
00:36:09.580 | They're simply not.
00:36:13.000 | Now, what should you do about Dow 20,000?
00:36:16.440 | Anytime you listen to information,
00:36:17.760 | anytime you listen to things, you should always ask,
00:36:19.760 | what's my action?
00:36:20.800 | What's the next action?
00:36:21.960 | Do I need to do something with this?
00:36:24.620 | So that should be what you're thinking.
00:36:27.900 | What do you need to do about Dow 20,000?
00:36:30.780 | If you take in an information like,
00:36:32.380 | hey, the Dow's at 20,000 and it doesn't affect you,
00:36:35.020 | then don't worry about it.
00:36:35.860 | If it's outside of your,
00:36:37.660 | something that you can affect or change
00:36:39.080 | or should change and affect, don't worry about it.
00:36:40.700 | Just move on with your day.
00:36:41.660 | Focus on something that is important to you.
00:36:43.680 | What should you do?
00:36:44.580 | Well, sit, look at your investments, see how they're doing.
00:36:47.780 | If your financial plan dictates
00:36:53.180 | that you should be making changes,
00:36:55.880 | you might take advantage of market highs
00:36:57.920 | as an opportunity to sell.
00:36:59.500 | But that should be driven by your financial plan,
00:37:04.940 | not just based upon,
00:37:07.240 | hey, I'm nervous about something.
00:37:10.100 | We'll get to the investment plan in a moment.
00:37:11.920 | Your financial plan is how your money
00:37:13.900 | actually integrates in your life.
00:37:16.040 | Your financial plan is what drives
00:37:19.340 | your personal decisions.
00:37:23.140 | Were you investing for retirement?
00:37:24.980 | Is that retirement 30 years from now?
00:37:26.660 | Well, if that retirement is 30 years from now,
00:37:28.500 | then Dow at 20,000 is not gonna be influential
00:37:32.060 | in your personal decisions.
00:37:34.860 | Now, are you planning to retire two years from now?
00:37:37.140 | Well, Dow at 20,000 might be an indicator
00:37:40.060 | that it's time to go ahead and start taking some cash out
00:37:42.340 | to start funding the first few years of retirement.
00:37:44.900 | If you were planning to buy a house,
00:37:47.820 | Dow at 20,000 might be an indicator of a high market,
00:37:51.020 | so it's a good time to go ahead and sell.
00:37:52.860 | Or you were thinking about starting a business.
00:37:54.840 | Well, if you're thinking about starting a business,
00:37:56.620 | you might say, I need to move my money to cash,
00:37:59.580 | so Dow at 20,000 would be a good time to do that.
00:38:01.940 | That's what I've done in the past.
00:38:03.380 | If you decide that you're gonna sell,
00:38:05.060 | like for me, I was starting a business,
00:38:06.420 | decided I didn't wanna own stocks anymore,
00:38:08.500 | wait for a high time to do it.
00:38:10.400 | This might be the time to do that.
00:38:14.040 | But that needs to be driven by your financial plan.
00:38:20.200 | The plan that involves your financial decisions
00:38:22.240 | and your personal goals.
00:38:23.760 | Now, what about your investment plan?
00:38:25.940 | Should you change your investment plan
00:38:27.560 | because of the Dow at 20,000?
00:38:29.160 | Well, if your written investment plan
00:38:34.180 | has in it a sell indicator of if the Dow hits 20,000,
00:38:39.180 | then sell, then yes, you should change something.
00:38:43.200 | But I guarantee that not a single one
00:38:45.260 | of your investment plans has that as an indication.
00:38:47.920 | So, short answer is no, you should not change anything.
00:38:51.280 | You don't change midstream in your investment plan
00:38:55.480 | unless something has materially changed.
00:38:58.680 | In your life, your financial plan has changed,
00:39:01.660 | your life goals have changed,
00:39:03.160 | or you've decided to change your strategy,
00:39:04.940 | but you don't change just because
00:39:07.040 | you have a certain indication.
00:39:08.080 | You follow the pre-planned,
00:39:10.640 | pre-thought-out investment plan.
00:39:12.460 | A majority of you don't have a written investment plan,
00:39:15.720 | so what do you do?
00:39:16.760 | Well, you keep doing what you're doing
00:39:18.160 | until you decide to change to a different strategy.
00:39:20.360 | Yeah, there are a few of you who are traders in the market,
00:39:22.720 | but you're not listening to this
00:39:24.040 | with the perspective of changing.
00:39:25.280 | Dow 20,000 is just,
00:39:26.600 | you're already taking that information in.
00:39:28.480 | The majority of you who own stocks
00:39:30.520 | own them in the context of a mutual fund.
00:39:32.960 | And those mutual funds are either actively managed
00:39:37.160 | or they're passive index funds.
00:39:39.560 | If your mutual funds are actively managed,
00:39:41.520 | then by definition, you have chosen
00:39:44.080 | to hire a fund manager to manage your money for you,
00:39:48.440 | and you're paying that fund manager
00:39:50.740 | to choose the companies that they need to invest in.
00:39:53.340 | So trust the fund manager to do their job.
00:39:57.400 | That's the investment plan that you've chosen.
00:40:01.180 | If you own a mutual fund that's investing,
00:40:04.560 | one of my favorite mutual funds, I always loved it,
00:40:07.000 | Investment Company of America with American Funds.
00:40:09.280 | They had the best brochure.
00:40:10.280 | I just, I love that American success story
00:40:13.720 | of the classic mutual fund with, what, 80 years of history.
00:40:18.520 | I always loved that fund.
00:40:19.440 | And they had the best brochure that was just so fun to read.
00:40:22.000 | Always was a favorite of mine.
00:40:23.520 | I'm not saying it's good, bad.
00:40:24.700 | I'm not giving a buy recommendation.
00:40:26.280 | I just thought it was a neat mutual fund.
00:40:28.560 | So if you have your money
00:40:30.440 | in the Investment Company of America with American Funds,
00:40:33.340 | you've hired the fund managers
00:40:36.000 | to make these investment decisions for you.
00:40:38.160 | They're gonna invest in the best companies of America,
00:40:41.080 | and they're gonna try to do so in an intelligent way.
00:40:44.000 | So Dow at 20,000 is information that they're taking in.
00:40:49.000 | They're taking in that information.
00:40:51.840 | They're seeking to make intelligent financial decisions,
00:40:56.480 | investment decisions because of it.
00:40:58.520 | They might be looking down and saying,
00:40:59.760 | "Hey, Home Depot is doing well.
00:41:02.160 | "Walmart's doing well.
00:41:03.560 | "We think we have these other companies
00:41:04.960 | "that are gonna be doing better.
00:41:05.840 | "Let's take some profit from Home Depot and Walmart
00:41:07.700 | "and buy these other companies."
00:41:09.200 | But the point is, that's not you.
00:41:10.620 | That's your fund manager.
00:41:12.820 | That's what you signed up for.
00:41:16.000 | Now, if something in your personal life has changed,
00:41:18.860 | then you would sell at Dow 20,000.
00:41:22.680 | But if nothing in your personal life has changed
00:41:24.800 | such that you're not gonna need the money,
00:41:26.400 | don't change because of market indicators.
00:41:29.320 | And I'll give you the same speech
00:41:31.760 | at the bottom of the market.
00:41:33.160 | Just happens to be that this is the top version.
00:41:37.120 | Now, if you're an indexer, okay,
00:41:40.100 | well, you have index funds.
00:41:41.640 | You don't have an investment manager
00:41:43.320 | who is choosing companies.
00:41:45.640 | But what are you committed to?
00:41:47.160 | You are committed in an indexing strategy
00:41:49.880 | to the overall growth of these companies,
00:41:52.680 | and you're committed to the fact
00:41:54.120 | that you can't guess which ones are gonna do better
00:41:56.280 | than others, so you're just gonna own all of them.
00:41:59.320 | So is there anything about the news of Dow at 20,000
00:42:02.180 | that will cause you to change?
00:42:03.720 | There's nothing.
00:42:06.880 | Unless something has changed in your personal life,
00:42:10.880 | in your personal plans,
00:42:13.200 | you wouldn't change your investment strategy
00:42:15.820 | just because of Dow 20,000.
00:42:18.060 | Because to do so would mean
00:42:19.940 | that you are sacrificing your strategy.
00:42:24.940 | You're not following it.
00:42:26.260 | Now, it's okay to change your strategy.
00:42:31.740 | Let's say you're changing your investment strategy.
00:42:33.380 | You can do that.
00:42:34.500 | But that would be because something has changed
00:42:36.780 | outside of Dow 20,000,
00:42:38.720 | and now you're just using an opportune time
00:42:41.180 | to go ahead and sell.
00:42:42.300 | I hope, I know this is simplistic,
00:42:46.900 | and there are a few of you who are pursuing
00:42:49.100 | your own unique trading strategies and things like that.
00:42:51.320 | Obviously, this isn't relevant to you.
00:42:53.200 | But to the vast majority of you,
00:42:54.500 | I just summed up all of your investment strategies.
00:42:57.580 | You've either hired a mutual fund manager
00:42:59.700 | to manage your money within mutual funds,
00:43:02.900 | or you've chosen to hire a passive indexing company
00:43:07.900 | to hold your money in,
00:43:10.860 | and you don't change your strategy because of Dow 20,000.
00:43:13.780 | Might be a good time to rebalance, I guess.
00:43:18.220 | Article here that I may be covering in the future
00:43:20.140 | talks about, titled for this last week,
00:43:23.100 | portfolio rebalancing might be overrated.
00:43:25.580 | We may talk about that on a news roundup, we'll see.
00:43:28.340 | But might be a good time to rebalance.
00:43:32.060 | Might be a good time to take some money.
00:43:34.060 | It's always fun to take money out of a portfolio
00:43:35.980 | and spend it if you wanna take a big cruise or something.
00:43:39.220 | But don't make quick decisions because of things out there
00:43:44.140 | that aren't really related to you,
00:43:47.380 | and aren't really related to your specific actions
00:43:50.340 | and to your goals.
00:43:52.300 | Dow 20,000 is meaningful because of the buzz
00:43:57.300 | that it will put in the market.
00:44:00.860 | And then also because it's reflective of other indexes.
00:44:05.660 | But the index itself is not particularly useful
00:44:08.260 | for analysis, it's really not.
00:44:10.980 | It's kind of just an old fashioned,
00:44:13.300 | fun thing to keep an eye on because it has such a history.
00:44:16.500 | And it's not useful to your life.
00:44:19.900 | So, don't worry about it.
00:44:26.900 | Notice it, enjoy it.
00:44:30.620 | It's good to enjoy when the market goes up,
00:44:32.460 | as long as you're not gonna get too depressed
00:44:33.900 | when it goes down, 'cause it'll go down.
00:44:36.380 | Time will tell when, we don't know when,
00:44:39.180 | we don't know how much.
00:44:41.020 | But just remember, one out of three years,
00:44:43.260 | the market's gonna be down a third.
00:44:44.980 | Every year it's gonna wander around,
00:44:46.780 | I don't know, 15%, 14%, 15%.
00:44:49.780 | It's gonna wander up, it's gonna wander down.
00:44:52.780 | Probably in the next couple decades,
00:44:54.340 | it's gonna go down by 50%.
00:44:56.580 | So you should be ready for that.
00:44:59.180 | That's what you signed up for
00:45:00.900 | when you signed up to invest in stocks.
00:45:03.420 | If you don't like it, get out.
00:45:06.540 | Your financial advisor should have told you
00:45:09.620 | to get out.
00:45:11.460 | Or educate yourself until you like it.
00:45:13.860 | Anyway, that's it, thank you all so much.
00:45:15.300 | Oh, oh, oh, as we go here, one quick thing.
00:45:17.540 | I need a huge favor from you guys.
00:45:19.240 | Web address, I wasn't prepared.
00:45:22.580 | You can enjoy the music for about 10 seconds.
00:45:24.860 | (upbeat music)
00:45:27.440 | (upbeat music)
00:45:30.020 | All right.
00:45:35.880 | (upbeat music)
00:45:38.460 | I'm just gonna make a link, okay.
00:45:42.280 | I'm doing a survey.
00:45:43.920 | With new advertising, I need to,
00:45:45.520 | if you'd be willing to help me,
00:45:47.000 | I need to get a little bit of demographic information.
00:45:49.000 | So I'm doing a very quick demographic survey.
00:45:51.800 | I'm working on selling a lot more advertising
00:45:53.760 | on Radical Personal Finance.
00:45:55.000 | I'm doing, again, a demographic survey.
00:45:57.040 | If you could do me a favor, please.
00:45:58.600 | If you just have about 15 seconds,
00:46:00.280 | personal favor would mean helpful to me.
00:46:02.640 | I need a statistically representative sample of you,
00:46:05.720 | of all of you to respond.
00:46:07.280 | So that means I need at least several hundred
00:46:09.000 | of you to respond.
00:46:10.080 | If you could please go to radicalpersonalfinance.com/survey.
00:46:13.600 | Radicalpersonalfinance.com/survey.
00:46:15.640 | That'll just jump you straight in.
00:46:17.120 | It's just a quick, simple,
00:46:18.600 | about a five question demographic survey.
00:46:21.240 | So please, radicalpersonalfinance.com/survey.
00:46:24.640 | Radicalpersonalfinance.com/survey.
00:46:26.480 | Did I say it enough times?
00:46:28.480 | Send the show notes, radicalpersonalfinance.com/survey.
00:46:32.400 | See y'all.
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