The Dow Jones has been characterized in recent trading sessions for having broken its price level above the 61.8% Fibonacci retracement and is close to the exponential moving average that it has in 250 days. A level that could serve as resistance and, if exceeded, could give an entry signal to make the savings profitable from now on. From where a very aggressive investment strategy could be applied and aimed at all profiles of small and medium investors, from the most speculative to the most moderate or conservative. In what constitutes a clear business opportunity within the international equity markets.
The fact that the Dow Jones exceeds short-term supports may be a sign that the recovery in equity markets is a fact after the crisis generated with the expansion of the coronavirus as of March. Where the Dow Jones has been one of the best-performing stock indices on the planet and in the world of money. In a way, caused by the rise of technological values that are the ones that have best resisted the coronavirus around the world. Where the Nasdaq has been in positive territory with respect to its annual profitability, with gains that are around 3% or 4%.
From this general perspective, there is no doubt that one of the best options available to all investors is to go to the US equity markets. They maintain an exceptional upward trend, at least in what refers to the medium and especially long term that are still in force under all kinds of strategies in the investments of stock users. And that can be maintained until the US presidential elections are held in late fall. This is a fact that can certainly explain the evolution of the Dow Jones and other stock indices in this country.
Dow Jones bullish since 2012
It cannot be forgotten that the Dow Jones has been in positive territory for a long time and that therefore at any moment it can stop its march on the stock market. Because you have to stress that nothing goes up or down forever, much less in the always complicated world of the stock market. And therefore there will be no choice but to assume that the bullish race will end its journey in the coming months. Now the question is to detect when this new scenario will occur in the Dow Jones and we have to be prepared for it. And perhaps it is time to return to the European equity markets in a capital transfer and turnover, just as investors with more learning in financial markets do.
Of course, this is the most beneficial investment strategy for all savers since it allows them to choose the best business opportunities with this class of financial assets. Because there is no doubt that sooner or later the American stock market will lose its strength. Not surprisingly, it has been on an upward trend since the end of the 2008 economic crisis and therefore has the most positive phase in its entire history. With a revaluation of almost 80% and leading the advances worldwide. In other words, the Dow Jones is the most profitable equity markets in the last decade and this is a factor that must be assessed when making our investments from now on.
What to do right now?
The decision by investors is very complex due to the very characteristics of this financial market at this time. Because in effect, its potential for revaluation seems to indicate that it has been exhausted or is in the phase of carrying out this process. And therefore we have to assess what we have to do from this moment on. Within this general context, we must look at the alternatives we have to make the available capital profitable for the coming years or even months. In this regard, it should be noted that the Dow Jones may have reached the end of its bullish run and may at least take a break in its price shaping for the next few months.
As an alternative to investment, if there is an adjustment in the valuation of the shares in the Dow Jones it may be at the end the time to return to the stock markets of the old continent. Due to the fact that they may have a longer upward path as a consequence of their lower growth since 2013 and that in some cases they are formed as values that can be considered as authentic business opportunities. With forecasts, in some cases, around 20% or even 30%. To the point that the securities portfolio will have to be changed in order to meet our investment expectations, at least for the end of the year. In an exercise that there is no doubt that it will be very complex for a good part of the small and medium investors.
Presidential elections in the USA
Another aspect that must be taken into account to operate in the Dow Jones during this year is that at the end of it the elections to the presidency of the United States will be held. Where traditionally the rises in the equity markets are in force and therefore it would not be surprising that there was a new upward pull that we could all take advantage of to obtain profits in the operations in the stock market of this financial market. In the hope that it will be the best climax to an uptrend that has lasted many and many years in force. With a better performance than that of those belonging to the euro zone.
Another very different thing is the evolution of the values that are integrated within the sector of the new technologies and that are listed on the Nasdaq. Its expectations are better since it maintains the uptrend in all possible timeframes: short, medium and long. From where it is possible to be open in the positions even for the longest periods of permanence. Since it cannot be forgotten that even in the most worrying moments in the expansion of the coronavirus it has behaved much better than in the rest of stock indices. To the point that in the month of May it has maintained a positive profitability for the year, with margins close to 3%. An exception within the international equity markets.
Divergences in geographic areas
Of course, what can be forgotten is that in this period of coronavirus there has been a great divergence between financial markets from one side of the Atlantic to the other. A factor that has undoubtedly served to configure the investment portfolio by small and medium investors. Beyond the type of values that they have opted to take advantage of in such complex moments as those we have experienced in these months of 2020. While on the other hand, we cannot forget the fact that the American indices started from a phase more bullish than the Europeans. With a divergence of more than 15% and that has helped these investors to have improved their profit margins in trading on the stock market. As well as the fact that its strength has been clearer for many years and that it has led to a transfer in financial assets in recent years. On the other hand, it may already be time to close out positions in the Dow Jones after so many years of profitable trading in the equity markets. Because indeed, we may be at the end of the long bull run that this important financial market has developed.
From this point of view, we will have no choice but to change our strategy in the equity markets, taking advantage of what has happened in these days of the expansion of COVID 19. It may be the perfect pretext to address other financial markets in other countries. geographic areas that may have a higher appreciation potential at this time. Because what it is at the end of the day is to be open to new opportunities in the world of the stock market and never be static since this strategy can only do us lose money in the movements that we have made. This is certainly a lesson that we must learn in these difficult days from the point of view of investing for individuals. Where you can lose part of the profits accumulated in previous years.
Understanding the Dow Average
The Dow Jones Industrial Average is one of the most closely watched stock indices in the world. It is calculated based on the stock prices of the top 30 US companies. It is not a traditional average. Instead, it is arranged in such a way that a one dollar movement in the stock price of any company will change the Dow Jones average to the same degree.
The Dow, as it is often abbreviated, is often seen as a measure of the performance of the market as a whole, and when it crosses an important threshold, such as 10.000 during the dot-com boom in the late 1990s or 20.000 more recently, it is considered a milestone for the stock market in general.
Companies currently on the Dow Jones Industrial Average include household names such as Walt Disney, Coca-Cola, IBM, Home Depot, Nike, and Apple.
Invest in Dow Jones companies
Since all Dow Jones Industrial Average companies are publicly traded, you can search the Dow Jones Companies List and buy shares in any of them. Any stock brokerage company will be able to help you make the purchase of stocks, so look for one with a level of customer service and a commission structure that you like.
Remember to take into account the commissions that brokerage firms charge when deciding whether to buy or sell stocks, as they can consume your profits or increase your losses. Some online brokerage firms offer commission-free trading for some or all trades, which can affect your investment decisions.
Don't forget the dividends
Many stocks in the Dow Jones Industrial Average pay dividends, which are payments from companies to shareholders. They can impact how much you earn owning the shares as well as price fluctuations between the time of purchase and sale. Use an online payment ratio calculator to calculate how much of a company's income it pays in dividends. Also look for the company's dividend yield, which is a year's dividend payment divided by the share price, when you make your investment decisions.
As with any investment decision, research the Dow companies before deciding to trade their stocks. You can study media and analyst reports, information available through your brokerage, and information in companies' public files. These are generally available through online brokerage portals, through companies' own investor relations websites, and through the Securities and Exchange Commission.
Direct stock purchase plans
Some companies allow you to buy your shares directly from them without using a traditional broker. In some cases, this may be a better deal than investing with a stock broker, but you should be sure to compare the fees and charges that the various options entail, as well as take note of any restrictions on when you can buy or sell stocks. If you already have a brokerage account, it might be beneficial to investigate whether it is worth owning shares in separate companies managed through a separate account.
Many direct stock purchase plans allow you to automatically reinvest dividends into more shares of the company.
If you are an employee of a company that is part of the Dow, or any other publicly traded company, you may have special opportunities to purchase the stock through your employer, potentially as part of a retirement plan. See what's available to you through your workplace and how those options stack up against other investment opportunities.
Buying Dow Index Funds
If you anticipate that the Dow Jones industrial average as a whole is going to rise, buying an index fund that tracks the companies in the index could be an attractive option. An index fund is an investment vehicle that tracks stocks according to a particular formula, such as tracking all companies on a well-known stock index. Since index funds do not require as much human expertise to choose stocks, they tend to charge lower fees than traditional, actively managed mutual funds.
Index funds typically pass the dividends paid on the underlying shares to investors, and you can choose to receive them directly as payments or reinvest them in more shares of the fund. Generally, you will be taxed on dividends in the year you receive them, whether or not you reinvest them.
Many index funds that track the Dow Jones Industrial Average are exchange-traded funds, which means that they are purchased through most brokers using a ticker symbol, similar to buying stocks. If you are interested in investing in a Dow ETF, look for one with a fee structure that you like and that offers you a company you trust.
Sell or wait?
When the capital gains begin to appear in the investments made, it is normal for savers to consider whether it is the right time to sell or, on the contrary, it is better to wait for the benefits to be more bulky, for which it is essential to prepare previously a strategy in which the investor's objectives are delimited, depending on their profile, the terms to which it is directed and the capital contributed, which will ultimately dictate whether to decide on one or another stock exchange alternative.
In situations of upward trend, the most sensible thing is to hold the investment until better prices are achieved in its quotation or until signals appear that indicate the end of this, although there is a risk of falling into extraordinary situations that can make it fall to a value of notably with the consequent losses in your income statement.
It is prudent to choose a formula that combines the safety-risk equation as a strategy to preserve the amounts contributed, especially in those bearish periods where it is easier for the small gains obtained to become a few trading sessions in red numbers for the investor, with the The dilemma, then, is whether to sell with handicaps or to go even deeper into them.