By Stephanie Berenbaum – February 4, 2013
Should You Believe The Hype?
You may have heard a lot of hype on Friday about the Dow Jones Industrial Average (DJIA) briefly hitting a five year high of 14,000. But do you really have any idea what the Dow Jones is or what this means? Here are some Fab & Fru stock market tips for understanding what the heck is going actually on!
What Is The Dow?
There are several major stock market indices – the Dow Jones is one of them. The Dow is compiled of 30 of the largest U.S. companies. Other major indices that investors follow are those related to the Nasdaq (technology oriented) and the S&P 500 (you guessed it – comprised of 500 companies).
As an investor, you can buy shares of these publicly traded companies – or invest in mutual funds. – Funds invest your money across multiple companies for you to help try and diversify your exposure and risk.
14,000 – Fab or Foolhardy?
This past Friday, lots of people went into a tizzy because the Dow hit 14,000 – almost an all time high, and a level not seen since October 2007. And whether this is a good sign or a cautionary one is really a matter of opinion.
Some people see the rise as a reflection of our recovering economy and improving consumer optimism – after all it was an encouraging jobs report that helped push the Dow to the 14,000 level on Friday (it’s down 100 points today). The flip side is – is there enough good news in the U.S. and global economies to be pushing the stock market to an all time high? Though things may be improving, most Americans would certainly say the economy is still in the dumps. Another reason to pause for thought? The last time we were near these levels was right before the crash…
Local and Global
We all know by now that we live in a global economy. Which means the “U.S.” stock markets are impacted by global markets. So, yes, that makes the markets even trickier to follow. And while you may feel housing prices ticking up in your neighborhood, or jobs growing which is all great – the European Debt Crisis and Middle East wars also affect the U.S.markets – which is why we’re always saying you need to be aware of the world to be educated on what’s going on here at home.
About half of all Americans are invested in the stock market – are you or aren’t you? If you are, do you think the rally in the market is cause for optimism – or concern? And if you’ve been waiting to invest in the market – would you consider getting in now or waiting for more of a pull back to take a chance? Tell us what you think!