As far back as the early 1800’s, sailors who crossed the equator for the first time were “initiated into the court of King Neptune” via a ceremony that typically involved at least one of head-shaving, fish-kissing and the eating of raw eggs. It seems like a lot of trouble to go to, celebrating the crossing of a “line” which separates one bit of ocean from an identical one a few feet away. Fortunately, the hazing aspect of the ritual has generally fallen out of favor in recent times, although equatorial crossings continue to be acknowledged in most navies and by many cruise lines.

We also have what are basically meaningless “lines” in the investment world. Recent headlines about the Dow Jones Industrial Average crossing through 10,000 (either way) make it seem as if either those thirty stocks or the number ten thousand have unusual significance.

When Charles Dow created the index in 1896, he felt that charting the fortunes of twelve large industrial companies might be an appropriate way to gauge the overall health of an economy just coming into its own. Later, various editors of the publications he founded made substitutions and additions to the list. It is now comprised of thirty large companies, some clearly industrial (Caterpillar) and others not so much (Walt Disney). Since first moving above the 10,000 mark in March of 1999, the DJIA has re-crossed it a couple of dozen times as the markets lost and gained strength. In early 2010, after flirting with 10,000 for a couple of days, the average dropped back through on February 4th, earning headlines across the country. It moved above 10,000 again the very next day only to close below it again the next. By the time you read this, it will likely have settled comfortably on one side of 10,000 or the other.

Although I am a professional money manager, it’s quite rare when the Dow’s day-to-day movements are of particular interest to me, even those relating to a line on a chart. With many thousands of stocks and dozens of financial indicators to choose from, the widely reported movement of a group of 30 stocks seems unlikely to be a source of significant information.

One of the most challenging aspects of investing is knowing what data may safely be “filtered-out”. Media pundits, both print and electronic, often stress the importance of line crossings and almost always have an explanation for such movements. Absent a world-changing event such as 9-11, Warren Ward Associates believes that it’s practically impossible to assign a particular reason to any specific market movement. However, we do believe that markets tend to move in broad cycles, so regression analysis is at the heart of our investment approach. We attempt to invest more in those sectors which have not done as well as we expected and reduce investments in those which seem to have done better. This asset allocation tends to protect our clients from the worst of market corrections while allowing them to ride along in better markets. One way to look at our approach is that we make money for our clients by not losing it to significant market pull backs, whatever their cause.

People who have not previously crossed the equator are called pollywogs, graduating to shellback status following the initiation ceremony. No such clear definition exists in the world of financial planning and investments. Virtually anyone is allowed to use the words “financial planner” or “financial advisor” to describe themselves. Obviously, we believe that individuals earning the CFA (for investment analysis) or CFP (for an individualized approach) should be among those you consider, should you ever decide to cede day-to-day control of your own investments.