Points or Percentages?

The Dow Jones is currently trading north of 26,000. As the market climbs higher the range of point moves become more prominent. For example, it’s not uncommon for the Dow to rise or fall 200, 300 or 400 points in a day. When the market has wide moves it catches the attention of the media and investors. A market falling 400 points sounds alarming, but is it?

On October 19, 1987 the Dow Jones fell 508 points, or 22.6%. It was the worst drop in the market since the since the Great Depression. Today, a 500 point drop is less than a 2% move.

In addition to the stock market being higher it’s possible your account value is too. A $1,000 loss has a larger impact on a $20,000 portfolio than one that is valued at $200,000

It’s now time to focus on the percentage change rather than the point change.

You better cut the pizza into four pieces because I’m not hungry enough to eat six. ~ Yogi Berra.

Bill Parrott is the President and CEO of Parrott Wealth Management, a fee-only, registered investment advisory firm.

February 2, 2018

Note: Your investments may perform better or worse than those listed in this blog. Investments are not guaranteed and they may lose money.