The Dow Jones Industrial Average: Failing the Average Investor

In addition to a well thought out Investment Plan, successful Equity investing requires a feel for what is going on in the real world that we all refer to as "The Market". To most investors, the DJIA provides all of the information they think they need, and they worship it mindlessly, thinking that this time tattered average has mystical predictive and analytic powers far beyond the scope of any other market number.

A cursory review of New York Stock Exchange (NYSE) Issue Breadth figures (93% of the Dow stocks are traded there) clearly shows how the Dow has neither been prescient nor historically accurate with regard to broad market movements for the past eight years. Additionally, this financial icon that investors revere as the ultimate "Blue Chip" Stock Market Indicator has lost its luster, with less than half its members achieving S & P ratings of A or better, and 20% of the issues ranked below Investment Grade.

Is the 120-year-old DJIA impotent? No, it's certainly helpful for Peak-to-Peak analysis right now, for example, to see if your Large Cap only Equity Portfolio is as high as it was six years ago. But it's based upon a seriously flawed Buy and Hold investment strategy and universally used as a market barometer, when its original role was as an economic indicator.

This is not just semantics. It's Wall Street's rendition of "The Emperor's New Clothes". Possibly, a weighted average of investor perceived business prospects for thirty major companies is a viable economic indicator, but leading or lagging? Clearly, there is no conceivable way that any existing average/index can measure the progress of the thousands of individual securities (and Mutual Funds masquerading as individual securities) that, in the real investment world, are "The Market".

And is there just "a" Market, when REITs, Index ETFs, Equity CEFs, Income CEFs, and even some Preferreds are all mixed together in such a way that most brokerage firm statements can't quite distinguish one from the other? Investors are dealing with multiple markets of different types. Markets that don't follow the same rules or respond to the same changes in the same ways. The Dow is dead, long live reality.

Feeling statistically naked? Don't fret Nell, here are a few real market statistics and lists that are easy to understand, easy to put your cursor on, and useful in keeping you up to date on what's going on in the multiple Markets of today's Investment World:

1. Issue Breadth is the single most accurate barometer of what's going on in the markets on a daily basis! Statistics for each of the Stock Exchanges are tracked daily, documenting how many individual issues have advanced versus how many have declined. Rarely are these important numbers reported, especially if they are painting a picture different from that being jammed down investors' throats by institutional propaganda. Would you believe, that in 1999 (when the DJIA and other indices) last achieved All Time High (ATH) levels, monthly Issue Breadth on the NYSE was positive only in April, followed by a 12 month paper bloodbath extending through May of 2000. Since then, Breadth has been positive for six consecutive years. Surprise!

2. Pay close attention to the number of issues hitting New Fifty-Two Week Highs (52Hs) and Lows each day: a) for trend corroboration, and b) to obtain a wealth of important information for daily decision-making and periodic performance understanding. The recent NYSE Bull Market (not a typo) is clearly evidenced by six consecutive years (from 04/00) with more issues hitting new 52Hs than new 52Ls... New Highs nearly tripled New Lows. So much for the standard market tracking tools... not to mention Wall Street manipulation of all the news that's fit to print for investors. Looking at the daily lists of 52Hs and 52Ls will help you determine: a) which sectors are moving in which directions, b) if interest rate expectations are pointing up or down, c) which individual issues are approaching either your Buy or Sell targets and, d) which direction your portfolio Market Value should be moving.

In recent months, REITs, metals, and energy stocks dominated the hot list while regional banks, utilities, and other interest rate sensitive issues were notsos (sic). These lists always indicate what's going on now, without any weighting, charting, or hype, making your job almost simplistic. Take your reasonable profits in the issues that have risen to new peaks (Sell Higher), and purchase the quality issues among those that are at 52Ls (Buy Lower). High prices often reflect high speculation with Bazooka potential, while lower priced value stocks often turn out to be bargains. Ishares, foreign Closed End Funds, Mining and Energy bloat today's 52H List while preferred shares and Utilities occupy the 52Ls... a bit more meaningful than "the Dow is near an All Time High", and a bit scarier as well.

3. Throughout the trading day, periodic review of three lists called "Market Statistics" will keep you current on individual issue price movements, active issues, sector developments, and more. How you interpret and use this information will eventually affect your bottom line, weather you are a Value Stock Investor or a Small Cap day trader. The Most Active and The Most Declined Lists describe individual and group activity, identify where some more detailed research might be appropriate, and provide potential additions to your Daily Stock Watch List. The Most Active and Most Advanced Lists will identify the hottest individual issues and sectors, identify areas where news stories may be worth reading, and instantly make you aware of profit taking opportunities.

I know you are tempted to shout "Blasphemy" at the top of your lungs, but the DJIA was developed in a pre-internet world (actually, pre-automobile) where the statistics discussed above were unavailable, only the wealthy cared about the stock market, there were no Mutual Funds, and, frankly Scarlet, 95% of the population just didn't care.

Now here's some blasphemy for you: It is likely that not one person reading this article has an investment portfolio that closely resembles the composition of the DJIA. It is just as likely that nearly everyone reading this article will use the Dow to evaluate portfolio performance. I've never understood this phenomenon, and I know that change takes time... but really, the Dow (and the other averages) have had their day, and far too much of your nest egg, for you to ignore this reality any longer.Being in debts is not a crime. This is what all consumers should keep in mind before they start taking loans and credits. But the fact remains that most debtors take loans often going beyond their affordability and fail to make the payments. What is required is a little awareness on debt related issues along with a planned budget that will help you to resolve your debt problems. Here are some useful tips to guide you when you are in debts.

Try out various options to repay debts:
Accept the fact that you are in debt and you have to pay off your loans. Do not file for bankruptcy without trying out the other options to get rid off your debts. It is always better to pay off the debt rather than declare a bankruptcy, which will have a negative impact on your credit profile.

So coordinate with your creditors, discuss your situation with them and initiate the negotiation. Some of your creditors may not be cooperative at all. But then negotiate with those who are willing to cooperate with you. Professional debt help from credit counselors or online debt consolidation can make it easier to deal with debts.

Do not acquire any more credit:
It is a general conception that one can repay previous debts by taking credit from some other creditor. This may help in some cases but if your income level does not support it then you better not go for this option. This is because you have already piled up a lot of debts and it may become difficult for to you to deal with so many loans at the same time.

You may also think of converting unsecured debts into secured debt but you may lose your home or car in case you fail to pay off the secured debt. Moreover, you may not be able to find a suitable debt settlement program, as these programs do not support consolidation of secured debts.

Assign a priority to your debts:
Prioritize your debts and try to pay off those accounts first which may lead you to trouble in the near future. For instance, if you have not paid the power bills, then pay them off first; otherwise, it may lead to termination of the power supply. Also, go for a tight budget and restrict your expenses to those items which are absolutely necessary.

Look for ways to add on to your income:
Look out for a part time job so that you can supplement your primary income with some extra dollars. This will add on to your budget and help you to repay the debts. Along with this, also ensure that you are utilizing all the benefits that you are allowed to get. You may contact the independent Welfare Rights Agency to know about the benefits that you can possibly avail. For instance, if your income level is low, then you may get a discount on your rental expenses or on the council tax payments. Also, go for an insurance policy that can help you with payments if you come across an accident.

Seek debt consolidation services:
Analyze your situation and then opt for a suitable debt consolidation company. Know how much their services can help you to recover from bad credit. Carefully go through the terms and conditions of the company and try to find out if there are any hidden costs involved.

Provide the counselor of the company with all the relevant details of your credit history and financial situation. This will help him to have a clear idea of how much you can pay towards the repayment of your debts and then he can come up with a suitable repayment plan so that you can get rid off debts within a shorter period of time. But the plan will only work out if you follow it strictly. For this, you may have to spend as little as possible; but this is nothing against a debt free life.

Know-how of some useful tips can relieve you from your debt problems as these provide solutions as to how you can manage to pay off debt. These simple and easy steps will help you to get over your debt problems. Debt consolidation could really be a good option.

Article Source: http://www.debtfinancearticles.com.

About the Author:
Steve Selengut http://www.sancoservices.com http://www.valuestockbuylistprogram.com Professional Portfolio Management since 1979. Author of: "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read", and "A Millionaire's Secret Investment Strategy".