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Financial advisers: Record high nice, but invest wisely
Dow breaks record again
NEW YORK - Wall Street extended its October rally today as investors grew more optimistic about upcoming earnings reports and Wal-Mart Stores Inc. said it will cut capital spending to drive overall returns.
The Dow Jones industrials shot up more than 110 points and crossed 12,100 for the first time.
Wal-Mart, the world's largest retailer, said it will be more selective about where it will open new stores, but still plans 600 new locations next year. The company sent the Dow component up more than 5 percent.
The Dow today reached a new trading high of 12,103.62, eclipsing the old mark of 12,049.51 set last week. In midday trading, the Dow rose 110.22, or 0.92 percent, to 12,112.59.
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"Psychology tells us we really don't want to be buying things when they're out of favor, but that's exactly when we should be putting money into the market." Carol Jones, owner of New Mexico Investment Advisors.
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The Dow Jones industrial average closed at more than 12,000 for the first time Thursday, marking a record that blared through the news and left many investors smiling.
It took seven and a half years for the average to go from 11,000 to 12,000, compared to 24 days for it to go from 10,000 to 11,000 back in 1999.
The milestone came on the anniversary of Black Monday in 1987, when the Dow had its second-biggest percentage drop in history and closed at 1,793.90.
If the feat piqued your interest in stock market investments, hold onto your enthusiasm: Local financial experts warn that it's best to look beyond the headline.
"You just don't get into the market and get out of the market depending on where the Dow is," said Virginia Stanley, principal in charge of financial services with REDW Stanley Financial Advisors in Albuquerque. "I think the markets are going to be strong next year, but inevitably, at some point, they're going to go down again."
The 20-year veteran of financial planning has this advice: Invest for the long-term and put your money in a variety of companies.
"You invest in different asset classes; you invest across different economic sectors," she said. "At one point in time, any one of those sectors can be on the top or bottom, but what will happen if you properly allocate is you will always get rates of returns that are middle of the road."
Stocks are not a substitute for savings, she noted.
"It is really important to make a distinction between saving and investing," she said. "They (investors) should have an emergency savings fund before they begin investing."
One trick to making good investments seems obvious: Buy low and sell high.
But throw some emotion in there, and it's not so easy.
"Psychology tells us we really don't want to be buying things when they're out of favor, but that's exactly when we should be putting money into the market," said Carol Jones, owner of New Mexico Investment Advisors. "When the market is high, it's very exciting and people want to follow it, but that's when folks should consider taking profits."
And don't just look at the Dow when assessing the economy's health. It's composed of just 30 companies. They're major companies, yes, but not the only ones, Jones pointed out.
There is also the Nasdaq, made up of about 3,200 companies. There's the Standard & Poor's 500, made up of 500 companies.
"The broader indices are probably more indicative of what's going on in the economy because they have more companies," Jones said. "It (the Dow) is not unimportant, but it's certainly not the only thing to watch."
But the fact remains that figuring out when to enter the market with a buy or exit with a sell is never a perfect process.
"Buy low; sell high; but who knows when it is a real low and real high?" said Gautam Vora, professor of finance at the University of New Mexico and president of the local chapter of the American Association of Individual Investors. "As long as you are within some portion of the lowest and the highest, you are doing very well."
His advice with the Dow's current record-breaking performance is to watch and wait before investing.
"This is a little bit too fast of progress," he said of the average's climb. "To constantly expect such large rises is not a bright idea."
