Why Dow Records Won't Matter at Allhttp://www.fool.com/retirement/general/2013/01/30/why-dow-records-wont-matter-at-all.aspx Dan Caplinger
January 30, 2013
With the huge rise in the stock market in the past month, you're going to be hearing a lot more about all-time records for major market measures. The Dow Jones Industrials (INDEX: ^DJI) is only about 200 points shy of its record closing high of 14,164.53, set on Oct. 9, 2007. Although the Nasdaq Composite remains well off its records from when the tech boom of the late 1990s came to its climax in March 2000, the S&P 500 is similarly close to its own high, less than 4% below its record of 1,565 from the same day.
For all the attention the approach toward the milestone will get -- regardless of whether it's reached -- you need to remember that it's completely unimportant. Let's look at three different but equally valid reasons why.
In particular, since October 2007, the Consumer Price Index has risen by about 10%. By that argument, the Dow would need to climb above 15,500 in order to set a new record level adjusted for inflation. Similarly, the S&P would have to go well above 1,700 to set a real record.
According to Barron's data, the Dow's latest dividends over the past year have added almost 350 points to the average. The corresponding figure a year ago was 320 points. Although dividends have fluctuated greatly over the past five years as the financial crisis led many companies to cut their payouts dramatically, the net impact of dividends means that on a total-return basis, many Dow investors have already seen their asset levels reach record highs.
3. Individual stocks
For instance, take a look at the performance of the Dow's members since October 2007. You'll find wide variations in performance: