Friday, June 28, 2013

Take a Deep Breath

Take a deep breath, and think things through before you take any actions.

No seriously, before you take any action on stock market news, step back, inhale deeply, and clear your mind. It will help you see the big picture, and enable you to make better decisions about your investments.

It is very easy to get caught up in what's on TV, or what is in the newspaper.

The Last Month

May 22, 2013: S&P closes down 35 handles from intraday peak. -14 points from previous day's close

May 28, 2013: S&P 500 rallies 25 pts intraday before closing up only 11 pts

May 31, 2013: S&P 500 closes down 24 pts, with most of that (13 pts) coming in the last 30 minutes of trading

June 4 - June 7, 2013: S&P goes from intraday high of 1647 early on June 4, to close at 1609 on June 5, then makes a intraday low of 1598 early morning of June 6, and close at 1643 on June 7. All told, 50 points down in 2 days, then 50 points up, ending the 4 day period almost unchanged

June 19 - June 22, 2013: Markets get clobbered as S&P drops from 1652 to 1584 in 2 days, a 68 point move, paused for a 3rd day, only to resume sliding on the 4th day down to 1560. In total, a 92 point move.

What To Do?

What's an investor to do, as the market gyrates wildly from day to day? What does the future hold? How about a couple of quotes from the wise Yoda?

"Patience you must have"

"Difficult to see. Always in motion is the future"

I bet Yoda would have made a great investor. He is patient, wise, full of optimism, aware of his limitations in predicting the future, and sees the big picture.

Looking back at this volatile period of stocks, things could have gone very badly for investors had they sold out during the panic. Today, the S&P 500 is back to 1613, only a few percent off the peak. Where it goes from here, even Yoda would have trouble figuring it out.

Lesson to be learned here?
Whenever the stock market panics, take a deep breath, step away from your desk, go eat something before you act. Look at the big picture, calm down, and analyze your investments not from how it is trading for the day, but how the business is doing.

Some ideas after the recent clobber? How about digging deeper in utilities, REITs, MLPs, and now, Canadian telecoms? All 4 areas are presenting attractive valuations again.

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