Stocks posted the first gain Tuesday after four consecutive losing sessions. The optimists hope this signals a rally in the making.
Pessimists see nothing but gloom (as least for the traditionally unsettled August market).
Where are stocks in the real world?
The market (defined by the Dow for this purpose) is slowly sinking for the year. The Dow is down about 178 points for the year and 622 from the high. It is almost 900 points above the low so far in 2010.
What does all this mean? For long-term investors, nothing.
At least, that's the traditional thinking. Unfortunately, counting on a 10-year average return of 8% to 10% (which is the range most quote as the historical average) may not be working so well.
At the close of 2000, the Dow was 10,787. Tuesday's close was 10,405, which means you don't even need a calculator to see for the past 10 years, the Dow is essentially flat. (Actually, if you factor in inflation, the loss is even greater.)
The point is long-term investing is still the only answer for most investors, even if you will not be able to count on a steady historical growth factor.
Find an up market (hopefully) as you approach the date five years before you need the money and bail out of stocks. Put your money in high-grade bonds (commercial or Treasury) and bank CDs.
Be happy with holding on to what you got.
Market indexes are helpful, but only if you understand what they can and cannot tell us.
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