Dow Closes Above 12,800 for First Time -- What Does It Mean?

When you hear the above headline, do you ever wonder what it really means? At first, you might feel relief, and think "Good, now maybe I can retire early" (or pay off my house, or whatever your financial goal is). But, on some level, don't you wonder what the heck they are talking about? More importantly, don't you wish you knew if this means there is some action you should be taking?

What Does It Mean?

The Dow is the Dow Jones Industrial Average, an index of 30 stocks that are chosen to somewhat represent the overall U.S. economy. The assumption is that if the Dow does well, it means that investors think the 30 companies will do well, which means that they are confident in the underlying economy.

When they say the Dow closes at a new high, that means that the stock prices of all the companies in the Dow pushed the Average to 12,800 as of the stock market close at 4pm EDT today. The Dow has actually been higher -- in February of this year, it was at 12,838 during the day, but prices fell below 12,800 before the market closed. By the way, the Dow fell over 400 points shortly thereafter.

What It Means to You

Basically, the Dow hitting a new high means that the value of your portfolio is probably higher than it was, say, last week. The most important action you should take is to follow the news to see whether the Dow record is just a one-day event or the beginning of a new trend.

The second most important step is to take an active interest in your personal finances -- whether by using a financial planner, or by doing it yourself. To that end, I've included some links to articles that will help you.

Understanding the Stock Market

• What Are the Dow Jones Averages?
• What Is the Stock Market?
• How Does the Stock Market Affect the U.S. Economy?

Basics of Financial Planning

• How to Invest in the Stock Market
• Should You Invest in Mutual Funds or Stocks?
• 10 Steps to Building a Complete Financial Portfolio