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As of this writing (January 2013) the Dow Jones Industrial Average, which measures stock market activity, is close to 14,000. It closed at 13,860 on January 31st. That number might not mean a whole lot to you, but for those of us who follow that number somewhat, it’s a huge deal. That’s because around four years ago, right in the middle of the great recession, the DOW was hovering around 8,000 before hitting its low point on March 9, 2009 of 6,500.
Why I bring this up is because all I remember from four years ago was the talking heads on the news and in the media telling us how we were all doomed by this recession and that it would take years and even decades for the stock market to recover. Don’t believe me? Check out these articles from 2009:
- When will the Dow hit 14,000 again?
- How long will it take for the Dow to return 14,000?
- Stock market recovery likely will be years in the making
- When will the stock market recover?
- 25 Years of Conventional Wisdom, Down the Drain
Turns out we weren’t doomed and the stock market has more than doubled in less than four years! That means if you left your investments in instead of panicking and selling them off, you have more than made up for the losses you experienced in 2008 and the beginning of 2009. In addition, if you continued to buy shares through your 401(K) or IRA, those shares were bought at their low prices while the market was in recovery and you have made a nice rate of return on them.
This whole thing is another example of why we have to realize who we are taking our advice from. I’ve written about this and been a guest talking about it before, but sometimes we let others’ opinions dictate what we do with money. Now I’m not saying you should just take advice from me or anybody else, but all this doom and gloom on the stock market four years ago is kind of funny in retrospect. Unfortunately a lot of people have bought into the doom and gloom and more people are avoiding stocks despite the run they’ve been on these past four years.
The purpose of this post is not to get you to change your investment strategy or to start day trading on single stocks. I have no idea what the stock market is going to do tomorrow, next month, next year, or five years from now. It could drop back to 6,000 just as easily as it could shoot up to 20,000. But either way, I’m going to continue to invest whether everyone in their brother is doing it or if no one else is.
For more information on investing, check out the podcast I did: The 4-1-1 on investing with guest Devin Czech.
Did the drop in stock in 2008/2009 cause you to change how you invest?