Dow Jones Wipes Out All of 2014 Gains

In a matter of just a few weeks, the Dow Jones Industrial Average has wiped out all of its previous gains for the 2014 year.

In what has been a tumultuous week for stocks overall, with the Dow Jones seeing triple digit drops and gains, on Friday the market capped off the week with an additional 0.69% drop (115 points) on the Dow. It was the worst weekly loss overall since May of 2012 for both the S&P 500 and the Nasdaq.

Volatility is approaching new highs as fear begins to set in among investors concerning whether this is simply a small correction—or the beginning of a bear market.

dow jones

The Dow Jones has erased all the gains it had from the previous 10 months–in just 3 weeks

What Does This Mean for You?

In working with some of our clients, we know how difficult it can be to stay out of the market, waiting for your “prices” to hit, while everybody else in the market is excited to see and hear how much their account values have increased this year. It’s hard to not jump in and take action instead of waiting for the market to adjust and come to your price. We have said many times (such as right now) that in a very short period of time, the market can give back all of its previous gains obtained over a long period of time. This time it has done it in three weeks. We hope by seeing this you can gain a better understanding of the importance of remaining calm and patient even when the market’s euphoria is taking investors in the opposite direction.

Those of you who haven’t been in the stock market for 2014—well, you haven’t missed out on anything. After 10 months, the Dow Jones has gone nowhere. It’s even slightly down compared to its close on December 31, 2013. Many of you were able to take advantage of other opportunities for investment during this period of time when stocks you were watching might have been over-priced.

For those of you who have been in the market, it’s time to consider if this is a warning sign of things to come. Does the increasing volatility, the huge up and down swings, and overall value of the market indicate there could be some trouble ahead? Or is this just a small correction; a normal swing in the long ride of any bull market? In our opinion it is time to make sure you have done all of the necessary homework to ensure that your investments still meet your criteria. If not, then you should consider making adjustments.



We aren’t telling you what our opinion is—that’s not our job as coaches. We want to inform you, let you know that the market has been acting differently, and to alert you on new developments.

The point of this post is to show how quickly your gains can be wiped out. Or how quickly the prices of stocks you’re waiting for can hit. This is not an attempt to predict where the market is going to go from here—we simply don’t know. Nobody does.

A lot of financial sites, newspapers, and publications will blame Europe. “Global markets drop amid economic fears”. Or “Europe sparks US selloff”. They always need something to blame when things are not going right.

The bottom line is, does the risk of investing today warrant the potential reward? Is there still enough upside to justify purchasing stock? Can you get individual stocks at a price below their value—or are they still high?

Time will tell what happens in the coming days, weeks, and months. The good news is, when you take the long-term approach—none of this market noise really matters. Buy stocks for less than what they’re worth and you’ll make money over time.

Happy investing!

Be Happy. Make Money. Retire Well.

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Kevin Tudor is the VP of Investment Training for Margin of Safety Investing, LLC. After a significant amount of time in the financial services industry, Kevin moved on to investment research and analysis to bring his expertise to the individual investor. He now resides in Scottsdale, Arizona where he conducts online webinars, writes financial newsletters, and provides various methods of investment training to show others the key strategies to successful investing.

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