The market's up, the market's down - what is all the buzz about?
In the past few weeks the stock market has been bouncing like a rubber ball on speed. But in recent days, it appears to have lost the bounce.
The DOW (Dow Jones Industrial Average) is comprised of 30 stocks. Usually very large multinational US companies.
The S & P 500 (Standard & Poors, a rating agency) holds the top 500 US companies.
These two indices are what folks usually refer to when they speak of the "stock market". There actually are over 5000 companies publicly listed - meaning that you and I and millions of other people may buy and own shares. (There are also thousands of companies privately held - e.g. Mars, the maker of Snickers, M&M's, Uncle Ben's, etc. is owned exclusively by the Mars family of McLean,VA. that are not included in either index.)
The value of a company stock will go up and down depending on many factors. If world or local events or an accident (like an oil spill) give cause to think the company is in trouble and cannot perform well and grow, the stock will bear a lower price. And the reverse is true - if everything good is happening - good sales, controlling costs, general public optimism - the stock price will rise.
Right now there are many factors, both home and abroad, affecting why the stock market has fallen (prices/values have dropped.) If you view the stock market as a living breathing organism inhaling and exhaling, you might realize the market has been inhaling for a very long time. The stock market has been rising with no substantial correction (drop) for a few years. The market cannot grow without substance. There has to be employment growth, a sound economy and solid political leadership to build and sustain a rising market. "The market hates uncertainty" is a quote I learned way back in the beginning of my career. It has proven to be true.
So how does this affect you? If I showed you a graph of the stock market from 1900 through 2014 you would easily see an upward trend, with occasional down blips. Seeing that visual might ease your concerns.
Be $ Smart - be aware the market goes up and down daily, and over the long-tern the trend has been up. It's the best way to make your money grow long term and to keep up with inflation.
The next $ Tip will take a look at how you feel/react to the ups and downs of the market - also known as Risk Tolerance.
