Dow 14,000 is big news but largely 'meaningless'

A For most investors, the Dow's close a hair above 14,000 on Thursday marks little more than the clearing of a psychological hurdle.

While it's true that such round-number milestones often draw big headlines and prompt some investors sit up and take notice of the market's gains, most investors would be wise to pay attention to the moves of broader indexes such as the Standard & Poor's 500 index. The S&P, as the name implies, tracks the moves of the 500 biggest U.S.-based companies.

The Dow, on the other hand, tracks 30 stocks. Granted, the stocks are big names such as General Electric, McDonald's and Wal-Mart that a lot of investors are likely to have a stake in through mutual funds and other investments.

"It's meaningless for the average investors, although it can be a headline grabber," said Dean Junkans, chief investment officer at Wells Fargo Private Bank.

"It could get some individual investors interested in the market again. The one piece that we don't have for the market top is we don't have the individual investor back in the market," he said. He referred to the notion that some investors are still gun-shy due to the stock market's implosion at the start of the decade and are hesitant to invest.

Milestones such as a 14,000 Dow can be good for reminding individual investors of the need to periodically re-examine their holdings, however. But watching the odometer flip to reveal a fresh set of zeros can also presage a pullback if it prompts some investors to lock in some profits.

So instead of focusing on the Dow for its own sake, investors might consider examining their holdings. They're more likely to find index mutual funds that track, for example, the S&P 500. There is about $1.32 trillion directly invested in the S&P 500 through index mutual funds and other types of investments. By comparison, there was $44.4 billion in assets directly tied to the Dow as of the end of the first quarter, the most recent figure available.

"It's just another number. I think it gets blown out of proportion," said Neil Hennessy, president and portfolio manager at Hennessy Funds.

He noted that many investors might be invested in some of the smaller stocks that populate areas such as the Nasdaq stock exchange.

"There are a lot of people that utilize Nasdaq stocks. The Nasdaq isn't keeping pace," he said. The Nasdaq would need to nearly double to return to the level of its record highs from March 2000, he noted.

Some investors are too quick to sell their holdings just because a threshold such as 14,000 has been crossed, Hennessy said. He believes the market has more room to run.