DOW hits 10,000 mark

Country Routes April 1997

How many of you understand what the DOW means? What about the TSE? Bear with me, those that understand.

Basically, they are indexes of the largest corporations in the United States and Canada. For the DOW it is the top 30. In Canada it's the top 300. There are other indexes such as the S & P and the NASDAQ. The S & P offers a more accurate and broader view as it represents the top 500. The NASDAQ stretches that to 1000, which includes more high tech corporations. Some call it the index of the future.

Many want to know, "Is this a good time to invest?" That, of course, is the $64,000 question, I would like to rephrase that slightly. "Is now the best time to invest?" If asked that question, I would honestly tell people, probably not. Why? Because many of the indexes are at record highs. Let me go back to the question I asked earlier. "Is this a good time to invest?" To that I would have to say, "Yes". I have a chart that shows the results of $10,000 invested in a well-known mutual fund between 1964 and 1996. It shows all the 10-year, 15-year and 20-year time periods. Call me for a copy.

If you understand the ups and downs of the indexes you will see that they run in cycles. One important fact you must understand about these cycles is that they cycle "HIGHER". In order to benefit from this, you need to expand your time horizon to a minimum of five years, preferably longer. The longer the better. I have written about this before in an article I wrote March 2, 1994 called, "Long-Term Investing". Call me for a copy if you haven't read it. I mentioned how I invested in the Templeton Growth Fund just prior to the "crash" of October 1987.

I have an article from Personal Investing, March 1989, on my office wall titled, "A Dow of 5000, John Templeton Thinks So". Of course, we know that it has already passed the 7000 mark but I like to use it to illustrate that the markets have cycled up. He was asked a few questions in it. PIN: Do stock market investors need a long-term view? Templeton: Positively. Long-term investors, not traders or speculators, make money. PIN: What kind of results should investors look for? Templeton: Don't focus on short-term performance. Even one-year results can be misleading. I've seen studies in which investors who picked funds based on a 12-month performance have wound up below-average total returns. PIN: Should you take a long view? Templeton: Definitely. You should look for at least a 5-year history before investing in a mutual fund. If you can find a 10 or 20-year record, that's even better.

On the back of my first quarter 1996 Newsletter, I have a chart showing the DOW going from 1000 to 5000 between 1980 and 1995. That chart is reprinted here. The DOW Jones Industrial Average passed through 5000 November 17, 1995, continuing the strong advance of US equities that began in the mid '80s. Is 10,000 achievable? Most assuredly, and sooner than many expect. Remember that 10,000 represents a doubling, and the DOW has achieved this twice in the 15-year period shown in the chart. Many observers think this level will be reached as early as the year 2000 which would represent annual growth of about 14%. But assuming a more modest rate of 8%, the target would be achieved by the year 2005.

DOW Chart

If you have any questions, please call Reg Borrow at 519-855-6639. He is an Independent Financial Consultant for Regal Capital Planners Ltd.

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Created: Mon Sep 23 10:30:50 1996
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