The Investment Scientist

The Story of the Dow

Posted on: August 3, 2012

My name is Dow. I was born in May 1896 to my father Charles Dow.

In 1900/1/1, I was 66. No, that was not my age, but my level.  People care about my level since the higher it goes, the richer they get.

In the first two decades of the 20th century, I wobbled around: 100% up and 50% down was the norm of the decades. Nevertheless, I ended the two decades at 108.

Dow 1900-1920

Just when people thought my wobbliness couldn’t get any worse, I decided to play a prank in the two decades that follow: I ran up six times, and fell 85%. A lot of people couldn’t take it anymore; they abandoned me, but I had a lot of fun. Nevertheless, I ended the two decades at about 150.

Dow 1920-1940

Now that only a few brave hearts stayed with me, I decided to reward them. I ran up four and a half times in the two decades between 1940 and 1960 to arrive at 680, making them much wealthier.

Dow 1940-1960

My fair-weather friends came back. I decided not to work for them; I gave them two decades of going nowhere. For the record, I started 1960 at 680 and ended 1980 at 850.

Dow 1960-1980

They left me in drove after two fruitless decades; again only the faithful stayed. This time, I decided to doubly reward them. I took off like a rocket, went from 850 to 11500 in 20 years. Those who were faithful became fabulously rich.

Dow 1980-2000

At the start of the new century, I had such a stellar reputation people said I could do no wrong. They would sell their house, their cars, and their children just to be with me.  Little did they understand, I wouldn’t just hand them wealth on a silver platter.  I just wobbled.

Dow 2000-2012

This is my story. Most people only want to be with me when I am up, but it is those who stay with me when I am down whom I reward with riches.

Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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