Charles Dow was a journalism pioneer and an early leader in the field of technical analysis. His approach to investing and market analysis still holds a place of important among today’s analysts. As his timeless teachings continue to provide great insight to the world of investing, it is important to remember and learn from the lessons that he laid out for us.
First and foremost, he taught that stock prices follow trends. This is the foundation of Dow Theory and Dow’s approach to the markets. He believed that trends tended to remain in place until fresh news or data emerged that changed the circumstances of the company or the broader economy. By spotting these trends and using them as a basis for buy or sell signals, Dow claimed that an investor could better position themselves to make profitable investments.
Second, Dow taught that the most successful investors in the stock market are the ones who stay true to their convictions. He counseled investors to never abandon their convictions or their medium- to long-term investments based on the whim of the market. Rather, he believed in maintaining a cool head and trusting in the underlying trends as risky investments or quick, short-term trades often do not pay off.
Third, Dow taught investors to remain patient with their investments. He believed that the key to success was to remain in the market for the long term and ride out the highs and lows with calmness and composure. By doing so, investors could avoid the dangerous pitfalls associated with a quick fix approach.
Finally, he taught the integral importance of thorough research. Dow believed that in order to make informed decisions about investing, investors must put in the leg work and do their due diligence. Doing so, according to Dow, was the best way to best position oneself for long-term investments.
It is clear that Charles Dow’s teachings still serve as strong and sound advice to investors today. As modern technical analysts still look to Dow’s approach and teachings to this day, those just starting out in investing would do well to draw upon his timeless wisdom.
