Fed Rate Cut Spurs Dow to New High

On October 1, the Dow Jones index hit at an all-time record close of 14,087, beating July's record of 14,000. 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 closed at a new high, that means that the stock prices of all the companies in the Dow pushed the Average to 14,087 as of the stock market close at 4pm EDT.

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 short-term reaction to the Fed's rate cut, or the beginning of a new trend. Pay particular attention to the Employment Report, which will be released October 5.

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