The Dow Jones Industrial Average just recently crossed 30,000 points for the first time.
Although this is an arbitrary number on an entire group of stocks, it’s still a memorable milestone that shows what an unstoppable force the stock market is over time.
In fact, it’s so unstoppable that this milestone will soon be nothing more than a distant memory. And it’ll seem incredibly small in hindsight.
I mean, there was a time when the Dow Jones hitting 10,000 points was a huge deal.
That occurred in March 1999.
Then it hit 20,000 points in January 2017.
Now here we are at 30,000 points.
Well, be prepared for things to get nuts.
Like, really nuts.
Over at CNBC, Josh Brown quickly explained why he’s expecting to see the Dow Jones hit 100,000 points in his lifetime:
He’s absolutely correct to expect that.
The long-term average annual rate of return for the US stock market is approximately 10%.
As Peter Lynch used to frequently point out, using the Rule of 72 tells us that the stock market should thus double roughly every seven years.
While that won’t happen in an exact, straight line – there’ll be fits and starts along the way – this overall trend will most likely continue over the long run.
Even if the US stock market only compounds itself at a mere 7% annual rate, that’s a doubling every ~10 years.
If you’re 30 years old, you might have 50 more years of investing to look forward to.
That could be five more doubles from here!
I’m guessing Josh Brown is in his early 40s.
What that means is, if we say the US market compounds at that more modest 7% annual rate moving forward, Josh is probably going to see the Dow Jones double at least three more times.
We’re at 30,000 now. So that’s a double to 60,000 points. Then another double to 120,000 points. Then yet another double to 240,000 points.
His point about expecting to see 100,000 points is putting it extremely lightly. While that’s a headline that CNBC is excited to run with, he was selling it way short.
I actually wouldn’t be surprised to see the Dow Jones hit 100,000 points in less than 20 years.
I’ve been analyzing stocks, investing, and creating investment content for a decade now.
That might seem like a long time, but I can tell you it’s flown by.
And I’ve already seen the Dow Jones move from 10,000 points to 30,000 points in that short period. Like Josh, I’m looking forward to seeing the Dow Jones cross 100,000 points – and much more.
This is why you shouldn’t time the market or let fear hold you back. The best time to invest was yesterday. But since you can’t go back in time, the second-best time is today. Every day you wait is akin to letting an unstoppable train inch forward without you.
Keep in mind, too, this is only a broad index we’re talking about.
An individual investor could do even better over the long run by investing in the right businesses at the right valuations.
Personally, I invest in high-quality dividend growth stocks. These stocks represent equity in world-class enterprises that pay reliable and rising cash dividends. They’re able to do that because they’re producing reliable and rising profit.
I buy these stocks at attractive valuations with the intention of holding forever. The dividend growth investing strategy allowed me to achieve financial freedom in my early 30s.
My personal six-figure stock portfolio now produces enough dividend income for me to live off of, which is truly a dream come true.
Warren Buffett likes to say that someone is sitting in the shade today because they planted a tree a long time ago. What he left out is that it’s not just any tree you’ll be sitting under. You could eventually have yourself a gigantic sequoia to provide you and your entire family shade for the rest of your lives.
What do you think? Is this milestone meaningful to you? Excited to see even bigger numbers in the future?
Thanks for reading.
P.S. Make sure to check out some excellent resources for making better investment decisions, becoming financially free, and living off of dividends.