Eau Claire (WQOW) - It was an historic day on Wall Street as the Dow Jones Industrial Average closed above 20,000 for the first time ever, but many people are left wondering how this affects them?
Many people have 401K retirement savings plans through their employer, or IRAs. And most of those funds are invested in the stock market. So a big market surge can add to those savings accounts. And a big drop in the stock market can reduce them.
Andy Schlafer, a financial planner with Baird in Eau Claire, said although we are starting the year at a record high,the markets could drop significantly, based on what policies are put into place under President Trump.
Schlafer said right now there is a lot of enthusiasm and confidence in the market because of what many are calling a business-friendly administration, and because corporate earnings increased worldwide in the second half of 2016.
But he warned against making drastic changes to your savings, because the market always has pullback, meaning if too many people sell, the market will drop.
"I think a good term we would use right now is cautious optimism," Schlafer said. "The fundamentals are there for this market to continue to build. However, know that a pullback is not unprecedented, and they do come unannounced, and it will be unexpected when the next pullback happens."
Schlafer said the best thing to do is diversify your investments, putting some of your savings in companies that fluctuate frequently, and the rest in companies that remain relatively steady, so you can make more money when the market is high, but won't lose as much when it drops.