If You Knew Then What You Know Now

Here’s an age-old question that plagues all of us at one point in our lives: If you knew then what you know now, what would you have done differently?

I’d venture to say that a lot of you (myself included) would have done a lot of things in life differently. Well, right now we are facing one of these moments in our investing lives.

Yesterday the Dow Jones Industrial Average finished the trading session at an all-time high of 11,727.34. That new high eclipsed the previous record mark of 11,722.98 set on January 14, 2000.

Two months after that new high on January 14, 2000, the market virtually had crashed.

So, what was the mistake that most investors made leading up to the January 2000 high? Well, most rushed headlong into the bull market, erroneously believing that the good times would continue indefinitely. Of course, we all know what happened in the succeeding months and years following the Dow’s last record high — the party came to an abrupt end, and a lot of wealth just evaporated into the ether.

Is this, as Yogi would say, déjà vu all over again for the Dow? I wish I could tell you I knew, but the fact is nobody knows for certain. What I do know for certain is that to protect yourself from another record-high-to-bear-market move in the Dow, you must have an insurance policy in place.

Please don’t permit yourself to get swept up into the current market euphoria without a conscious recollection of what has happened in the past. It is imperative that you take steps to prevent yourself from getting washed away in the flood of the next down market. And folks, believe me, there will be a next down market. History tends to repeat itself, and as Santayana famously said, "Those who do not remember the past are condemned to repeat it."

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