“Biggest IT Outage in History Cripples Travel, Hospitals, and other Key Industries”
“Head of Secret Service Resigns Over Failed Former President Assassination Attempt”
“President Forced to Cease Reelection Bid”
“Earth Has Hottest Day on Record”
“Stock Market Hits 25th Record High of The Year”
I watched Sesame Street as a kid, and they had a segment where you guessed which one of things displayed on the TV didn’t ‘belong’ there. Maybe there were 3 cats and a dog, or 4 red balloons and 1 blue one. If you were to read the above headlines – news from the last week or so – you would certainly guess that the last headline, the one about stocks hitting record highs, would be the one that does not ‘belong.’ You’d be wrong.
Reading headlines is easy. Buying or selling stocks based on headlines – on bad news (which is mostly what is reported) – may satisfy the short-term emotional itch to ‘do something’ but it is rarely in your long-term financial interest. You (should) own stock for years, not days, weeks or even months. Today’s headlines will be soon forgotten, and the only thing that matters is how the companies you own perform financially (earnings, etc.) over time. If you feel compelled to read the news and make investment decisions accordingly, then read the ‘right’ news. Look up if a company you own recently increased its dividend. The annual growing of a dividend is a great proxy for growing earnings which over time tends to correlate with rising stock prices. Research things that have strong connections to ever higher stock prices over time – none of which are the first 4 headlines above (or anything similar to those that are dominating the news right now).
That time will serve you well, and likely lead you to taking smarter action vis a vis your portfolio – if any action at all (since, unlike news headlines, the fundamentals of well-established business don’t tend to change much in the near term). Think of other headlines as serving your entertainment needs, or interest in following politics, etc. Do not correlate them to your long-term stock holdings as you will end up constantly chasing your tail, when – if you did good fundamental stock research up front and have a well-diversified portfolio of high-quality companies – just holding what you have and letting the power of compounding do its thing is usually the right course of action.