Written by: Jeremy Shafer
“In the short run, the market is a voting machine. In the long run, it’s a weighing machine.” -Benjamin Graham
The Dow Jones Industrial Average topped the 15,000 mark for the first time ever. It’s quite a milestone, yet many are wondering if the rally has run out of steam. Let’s begin with a simple fact: no one knows what tomorrow will bring – not MSNBC, Fox Business, or any of the other talking heads (this one included).
But smart investing isn’t (and hasn’t ever) been about knowing the future – it’s about seeing the present with clarity, as Dr. David Kelly put it. And presently, stocks are trading near their historical average. In the past, stocks selling at this price level were a mixed bag over the following 1 year period, with some gains and losses. The telling picture is in the 5 year period, where stocks have generated healthy returns when selling at/near current prices, though periods still experienced losses.
The markets may serve up a bumpy ride, but long term investors with an allocation strategy in place should be well positioned going forward.
