When analyzing stocks, the current price and the underlying value often diverge. If this were not the case, there would be no advantage in picking the right stocks and sectors.
I have a proven method, but it requires emotional detachment – a focus on fundamentals.
There are always things to worry about. Most of what you read and watch comes from those seeking a story. It is boring (but accurate) to say that we are in a period of modest economic recovery that is extremely good for corporate America. It is more exciting and alliterative to talk about a “double dip.”
You need to own stocks. Like most folks, you don’t own enough. People buy and sell at the wrong times, and they miss the best ones – like Apple. The average investor does worse than “buy-and-hold” — by 4% a year. It isn’t always enough to be a smart guy. People believe they can trade stocks the same way they make business decisions. Not so. You need to act at the times when everything looks bad–when all the news is doom and gloom.
You need to be politically agnostic. Be willing to profit no matter who’s in power. Act on your opinions in the voting booth, not as an investor. Since nearly everyone is worried, and the problems are on the nightly news, there are plenty of good stocks to buy.
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