Fundamentals of Investing

Fundamentals of Investing

Don’t fall prey to herd mentality

With the government shutdown and other worldwide uncertainties, by “not following the herd,” the investor has opportunity.   When we have wars, natural disasters, government regulation, interest rate fluctuation, high unemployment, etc., downturns in the market often occur and investors often run for the hills. However, for every negative there is a positive.  In deciding to hold on to good positions, we must stick to the fundamentals.   With these events, we are able to buy more at cheaper prices.

Pretend the market is having a “promotional sale” on stocks you love.  If a natural disaster occurs, such as the earthquake in Japan, we see the market take a dip.  Ask yourself: what potential opportunities do I have?  There might be opportunity in companies that produce resources Japan would need to help rebuild, like lumber, steel, or copper.  There might also be a need for tractors, medicine, etc.  There are many different things that might be needed and can be seen as a good buying opportunity.

In 2001, many people pulled out of the market. A few years later they wound up saying, “If only I stayed in and bought more when it was low.”  In 2008, many people pulled out again only to end up saying, “I wish I stayed in and bought more shares while the market was low.”

The basic fundamentals of investing have not changed. Often times people try to complicate the situation. There is no room for second guessing or emotions when it comes to investing, only fundamentals and logic.  Find a professional investment advisor that can help you stick to the fundamentals of investing and take emotion out of your investments.  Hiring a good investment advisor is like hiring a good coach. It will help to keep you on track and make sure you never lose sight of the fundamentals.