Now that I have your attention and in case you were not out of your cave today, the Dow did top 20,000. Yeah!!!. And yes, it feels great to see your portfolio value rise every other day but that is precisely the wrong reaction at the wrong time. Because you are not done saving, you are not done investing yet. And if you are at a stage in life where your human capital exceeds your financial capital on that net worth ledger which is most likely true for you the millennial or you the Gen Yer or even the Gen Xer, you should really hate this market. As long as you are taking risks that you get compensated for, you do not want the markets to go up too much too fast. Because yes, you will make 10% this year but so what. That is 10% on 100,000 dollars instead of 10% on a million dollars later on in life.
Now back to Dow at 2 million, I say that is completely plausible by the turn of this century. That is, 83 years from now, Dow will not only reach 2 million but will exceed that number by a mile. How can I be so sure? Because for that to occur, the Dow has to compound at 5.7% each year from now till then. That return by the way is about half of what the Dow has delivered over the past 100 or so years. Still doubt that the Dow will be able to achieve that? Then go beyond Dow and own the broader market. Own small and big companies, growth and value companies, US and international. Own all of it.
And while you are in the thick of it, there will be many a year from now till then where the markets will drop and keep on dropping and then they will rise and rise. There will be wars, recessions and a depression or two. But if you are not in retirement or nearing retirement, this should not faze you a bit. Because that Dow 2 million is coming. If not for you then for that generation after you.
Image credit – MiraCosta Community College, Flickr