The lesson here is that no one forces you to buy or sell. You don't have to do anything. The market is there to serve you, not the other way around. The flip side of this, is simply doing nothing because you're "right" and the market is "irrational" is a quick way to the poor house. It is not about being right or wrong. Those are absolute terms and stocks don't care nor do they operate on those terms. The key is that stocks and the stock market only worry about are things getting better or are they getting worse. Contrary to what you might think, the price of a stock today is a reflection of what willing buyers and sellers are anticipating the company will generate in earnings 12 to 18 months into the future. The past is almost irrelevant. We don't drive our cars by looking in the rear view mirror and we don’t invest by looking at what the company has already booked in earnings and revenues. So here is the rub. The future is unknowable. So we are merely guessing? There are no guarantees in life and the stock market is no different. Selecting investments you've adequately researched and understand will help reduce the chance of major losses. Now stocks prices regularly fluctuate. As medium to long-term market operators, we largely ignore the day-to-day movements since there is too much noise, and concentrate on a 12 month to 36 month outlook. One of the greatest advantages as individual investors is time, but remember time is not an excuse to hold on to your losers. So we want to think about the stock market as a business partner. I turn on my computer every morning not sure what mood the market will be in. But that is okay, because no one forces me to do business with the market everyday. I get to choose when I want to transact. So when the market has been in a really good mood for several years and prices are high relative to earnings, I am happy to have my business partner take those shares off my hands. Conversely, when my partner is having a long duration of bad hair days and is grumpy and in a foul mood, marking down share prices well below a reasonable value, I am happy to do business with my partner. The stock market is there to serve us, not to be a slave to the day-to-day market gyrations. Most people get this backwards!
Best Returns!
P. Franklin, Jr
April 21st, 2017
All opinions and estimates included in this communication constitute the author’s judgment as of the date of this report and are subject to change without notice. This communication is for informational purposes only. It is not intended as an offer or solicitation with respect to the purchase or sale of any security. This information is subject to change at any time, based on market and other conditions. Any forward looking statements are just opinions – not a statement of fact.
Investing may involve risk including loss of principal. Investment returns, particularly over shorter time periods are highly dependent on trends in the various investment markets. Past performance does not guarantee future results.