Half of middle class America missed out on the DJIA turning 20,000 – It’s time to jump in!

Half of middle class America missed out on the DJIA turning 20,000 – It’s time to jump in!
Eileen St. Pierre, The Everyday Financial Planner

It was a big deal on all the financial news channels when the Dow Jones Industrial Average (DJIA) turned 20,000 on Wednesday, 1/25/17. But when I saw this article that half of middle class America missed out, my bubble really deflated. In 2007, almost 75% of Americans with incomes between $30,000 and $74,999 were invested in the stock market. Today, that number is down to 50%. In addition, only 38% of those aged 18 to 34 are invested in the stock market.

Yeah, I’ve heard the story. You are afraid you are going to lose money. Indeed, a lot of Baby Boomers just starting retirement or looking to retire soon took a hit to their portfolios during the Great Recession. Millennials saw the affect this had on their families.

e00013449But instead of focusing on the negatives, let’s consider the glass half full:

Since 1921, the DJIA has only lost money 30% of the time.

This chart shows that from 1921 to 2016, only 30 years had negative price changes. This chart does not include dividends. If you reinvested the dividends you earned by owning these 30 stocks, this would help offset the drops in prices.

This means over 2/3 of the time, the stock market goes up.

I’ve been telling people this for years. I bet if you told people they could make money in real estate or some other physical asset over 2/3 of the time, they would jump on that investment. People are just more comfortable investing in assets they can see and touch. Financial assets scare people because they are hard for people to visualize.

Since 1921, the DJIA has averaged 7.46% a year.

This calculation adjusts for inflation and includes reinvested dividends. If you are investing for the long-term, you really cannot afford to be out of the stock market.

I intend to still be invested in the stock market when the DJIA turns 30,000. Will you?

Visit my Basic Financial Management page for more information on Investing.