Saturday, August 18, 2007

Fidelity and Peter Lynch on "Market Fluctuations"

Blah, blah, Blah, everybody has an "expert" opinion on recent "turmoil" in the financial markets. Fidelity has a nice article that quotes some of the saner experts, including Peter Lynch, who says:

If the Dow and the overall market fall 5 to 10%, and you feel compelled to sell, don't invest in the stock market. These drops are normal. They happen every 12 to 15 months and you need to have the stomach to ride them out.

If you worry about what the market will do in the next 6 to 12 months, you are not investing. You are gambling. Some of my best stocks paid off handsomely in three years, some in five. In every case, earnings made the difference.

So focus on earnings more than fluctuations. Corporate earnings drive the stock market. Yes, other influences impact stock prices, especially over a short period: the influx of money, even tragic or shocking events, can have an effect, but ultimately earnings decide.

And from William O'Neil, founder and publisher, Investor's Business Daily (IBD):

The public gets most of its information about world politics and the economy, critical to investor psychology, from our national press. Most of the press, however, is woefully ignorant or perhaps biased about how our economy, business, and the stock market work.
...
My advice to investors: Check charts and fundamentals to see how leading stocks hold up each week. Think contrary when the press tells you how bad things are. Conditions are frequently better than you think.

And if you are unable or unwilling to follow the advice of these two top investment experts (true experts), you won't have anybody to blame but yourself for any anxiety you may be suffering from due to recent market "turmoil."

-- Jack Krupansky

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