The Dow Hits 20,000

And the crowd goes wild…

On January 25, 2017 the Dow Jones Industrial Average (DJIA) broke new ground, closing above 20,000 for the first time. It’s all over the news, and this piece of history is getting plenty of traction.

It’s easy to see why people would get worked up over this. The bull market following the 2008 recession keeps on trucking and every new high is viewed with bated breath. Is the market overvalued? Will we see a correction?

Here’s the thing though: the Dow Jones doesn’t matter.dow-hits-20-000

That’s right. It’s actually a terrible economic indicator.

First off, what is the Dow exactly? It’s a stock market index consisting of just 30 American companies. They take the sum of the share price of each of these thirty companies and compute an average based off a number called the Dow Divisor. That’s the Dow Jones Industrial Average.

Some of the companies included in the index are: American Express, Boeing, General Electric, JPMorgan Chase and The Home Depot.

Part of the problem here, is that you can’t accurately judge the health of the overall U.S. economy on the back of 30 companies. You won’t find Google, Facebook or Amazon in the DJIA.

Secondly, the Dow doesn’t compute their average in a way that makes any sense.

Imagine you own a single share of Alphabet, Google’s parent company. That will set you back $850. Your friend, meanwhile, owns ten shares of Motorola. At $85 a share, you and your friend have both invested $850, but the Dow gives greater weight to the single share of Alphabet, than the ten shares of Motorola.

Imagine that single share of Alphabet increases by 10% while your friend experiences a 10% drop in his shares. If the market consisted of just the two of you, the overall effect would be neutral. You gain 10% and he loses 10%. The Dow, due to way it is calculated, would say there was an overall gain in the market.

It simply gives too much weight to higher-priced stocks. As a result, companies like Goldman Sachs and IBM have an outsized influence on the movement of the entire average.

Finally, the index is always changing. Since its inception in 1896, the index has changed 51 times. So if you want to look at the Dow on a historical basis, you have to know that you’re not looking at the same companies over time. In fact, when the Dow first came into being, it consisted of just 12 industrial stocks (hence the name). Today the index has little to do with traditional heavy industry.

Look, if you want a good market indicator, just go with the S&P 500.


At any rate, here we are. The Dow is at 20,000, likely because of positive expectations in regards to what President Trump is going to do to help boost the economy.

In fact, the S&P 500 also hit new-highs, in part due to bullish sentiment in sectors directly affected by the President’s first executive actions. Trump promised to boost manufacturing and announced the go-ahead of two pipelines so stay sharp on those areas.

So, remember the Dow doesn’t really matter. It’s just a nice, round number that the press can talk about. Instead, focus on your portfolio. There’s going to be a lot of talk about where the market is because of how long this bull market has lasted but as an individual investor, you still want to be making the best decisions for your investments. The rest is probably just noise.

*** SPECIAL ALERT — July 25, 2020 — TWO of this Year’s Motley Fool Stock Picks Have Already Tripled and Two have Doubled! ****

We have been tracking ALL of the Motley Fool stock picks since January 2016. That’s 4+ years, 54 months and 108 stock picks. As of Friday, July 24th 2 of their 12 2020 stocks picks have already tripled (TSLA, SHOP). In addition, 4 of their 2019, 8 of their 2018, 7 of their 2016 and 10 of their 2016 picks have also doubled. Best of all, over these 54 months, the average stock pick is up 111%. That beats the SP500 by an average of 87%. And that’s even accounting for all of this COVID mess that has wreaked havoc on some stocks but presented opportunity for other stocks. THAT is how the Fool does so well!

  • Shopify (SHOP) – April 2, 2020 pick and it is already up 163%
  • Zoom Video (ZM) – March 19, 2020 pick and it is already up 107%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 26%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 123% compared to the SP500 -7% so it is ahead of the market by 130%
  • HubSpot (HUBS) picked December 5, 2019 and it is up 46%
  • Netflix (NFLX) picked November 21, 2019 and it is up 42%
  • Trade Desk (TTD) picked November 11, 2019 and up 111%
  • Zoom Video originally picked Oct 3 and it is up 234%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 44%

Now, no one can guarantee that their next picks will be as strong, but our 4.5 years of experience has been super-profitable. They also claim that since inception, their average pick is up 424% and now we believe them. You sure don’t want to risk missing out. Many analysts are saying that we have passed the bottom of this COVID crisis and stocks will recover quickly. So make sure you have the best stocks in your portfolio.

Normally the Fool service is priced at $199 per year but they are currently offering it for just $99/year if you click this link

CLICK HERE to get The Motley Fool’s Stock Picks for just $99 per Year! 



Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW

(before it’s too late)

Leave a Reply

Your email address will not be published. Required fields are marked *