Dow record: Good news for those who stuck with stocks

picture of a stock certificate

It's a good time to be in stocks. Or should we say, to already have been in stocks.

The Dow Jones Industrial Average, which tracks 30 blue-chip companies, rocketed past its all-time high Tuesday, closing at 14,254, nearly 100 points above the previous record.

That was set back on Oct. 9, 2007, when the Dow Jones hit 14,164.

This milestone is a cause for celebration for those who have stuck with the market and all its turbulence these last five years.

And it's welcome relief for those forced to move more money out of the safety of CDs because of low interest rates.

Assuming they held onto their positions, most savvy investors who saw massive losses in stock portfolio value in 2008 should be well in the black.

I know because I'm one of them.

When I began investing last decade, I read some books and started with a traditional strategy of dollar cost averaging — which calls for investing a set amount in the market every month, whether the market is up or down — into stable blue chip stocks with solid dividends.

My two first, and biggest, positions were Proctor & Gamble and ExxonMobil.

Unfortunately, it meant I was buying both stocks at their peaks. Within a year, the housing crisis hit the market and things went south.

I was buying ExxonMobil in the low $90s in 2007, and by 2008 it was trading in the high $60s. The same story went for Proctor & Gamble.

It's like I had jumped on the train right before it stopped and started going backward.

Partly by reason, partly by stubbornness, I decided to hang on.

As I became a more educated investor, I continued to buy at intervals. I even used some dips to my advantage to buy undervalued stocks.

But I hung on to my two original positions. I was willing to live with a short-term loss for a long-term gain.

I've finally returned to the black with both stocks. I've also made some decent dividends.

This underscores why you have to avoid panic at all costs.

It's one thing if you're two years away from retirement, but if you're in your 20s or 30s, you've got decades to ride out these stock market declines.

Time is on your side. Panic selling or panic buying will almost always lead to a loss.

Remember this when the next inevitable decline occurs.

It's common for markets to have a "pullback" or "correction" after reaching a peak. Plus, we've had so many financial crises in the past few years, there's no telling what could happen next.

The sequester? Student loan debt? A natural disaster?

Anything can set off market panic. When it hits — warranted or not — you've lost 5% of your money in a flash.

Dow record: Good news for those who stuck with stocks

5 smart moves to start investing in stocks: You've got your financial house in order. You've got an emergency fund. You have little or no debt and a 401(k) set up at work. Now you’ve got a few extra bucks to put away, and you want to make a little more than the measly interest rates CDs are paying these days. Follow our advice, and you'll build a solid portfolio of individual stocks that can grow your money over time with the least possible risk.

Yes, the Dow record will likely tempt some investors to drop more additional money in the market. But the real gains have been made over the past couple of years.

Still, if you have $10,000 to invest, you might want to split that up into 12 equal amounts and invest that much every month over the next year.

Dollar cost averaging still remains one of the best strategies for a regular Joe or Jane with limited market knowledge because it takes market timing out of the equation.

If the market continues to rise, you'll feel like you're missing out on gains.

But if the market crashes three months from now, you'll be glad you didn't dump all of your money in today.

You'll not only have lost less, you'll still have money to buy stocks at depressed values.

Follow Craig Guillot on Google Plus.

Dow record: Good news for those who stuck with stocks

picture of a stock certificate

It's a good time to be in stocks. Or should we say, to already have been in stocks.

The Dow Jones Industrial Average, which tracks 30 blue-chip companies, rocketed past its all-time high Tuesday, closing at 14,254, nearly 100 points above the previous record. (more…)