Ignore the market swings and stay focused on value

Author: Walt Sokira

Covestor model: Focused Stock Research

Disclosure: Long AAPL, SBUX.

One of the biggest mistakes investors and professional advisors make is making investment decisions based on a market outlook rather than an investment philosophy.

I think most market outlooks are a short-term, quick-changing, convoluted, set of hodge-podge opinions based on group thinking. Market-outlooks tend to be emotional. Today, the overriding emotion in most market outlooks is fear. Also, there is telling research/evidence supporting the conclusion that most market outlooks are highly unreliable and virOtually useless.

Let's think for a bit about your own life. If I ask you the straightforward question, “What's your outlook for the week?” I know in my life often it's hard to see through the day. Think about your local weatherman (or woman): what is their outlook for the week? How accurate are they?

I prefer to work off a philosophy. Our philosophy for investing is fairly straightforward. We invest in financially powerful, attractively priced companies; and when they are not, we sell them.

Let's take Apple (AAPL) or Starbucks (SBUX) as examples. In our opinion, both of these companies are financially powerful. Also, we believe these companies have stocks that are attractively priced. When you have a philosophy, all the doom and gloom headlines matter less. With a philosophy, it matters less if Greece leaves the Euro. When you have a philosophy, it matters less who wins the presidential election.

Sure, these headlines could tank the overall stock market, as we saw in 2008 and 2009. It didn't matter how financially powerful a company was or how attractive their stock price was, it went lower.  However, most of the companies that were financially powerful and attractively priced bounced back to new high price levels.

So our advice is clear. Get off the doom, gloom or boom market outlooks and find some fantastic companies that are financially powerful and attractively priced. If you need help, take a look at our Focused Stock Model.

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