The Best Investors Ignore the Market

Recently, I finally read one of the classic books on stock investing, “One Up on Wall Street” by Peter Lynch, the 2000 edition.  Among many of the intriguing insights, there was one factor mentioned that never seems to get much discussion because everybody seems to always obsess about the opposite.

On p. 89 in Chapter 5, Lynch writes:

The market ought to be irrelevant.  If I could convince you of this one thing, I’d feel this book had done its job.  And if you don’t believe, believe Warren Buffett.  “As far as I’m concerned, … the stock market doesn’t exist.  It is there only as a reference to see if anybody is offering to do anything foolish.”

Further down the page, he adds:

Just for the sake of argument, let’s say you could predict the next economic boom with absolute certainty, and you wanted to profit from your foresight by picking a few high-flying stocks.  You still have to pick the right stocks, just the same as if you had no foresight.

Later, he hits the point home:

In case after case the proper picking of markets would have resulted in your losing half your assets because you’d picked the wrong stocks. … If you want to worry about something, worry about whether the sheet business is getting better at [Company A] or whether [Company B] is doing well with its new burrito supreme.  Pick the right stocks and the market will take care of itself.” [emphasis mine]

So what is this ‘opposite’ factor that everybody seems to obsess about?  The state of the market. Did it go up or down today?  Why?  Who were the big winners and losers?  What economic and political data and news caused this?  Blah, blah, blah …

Is it any wonder why there are so many nervous investors out there?  I love how, multiple times, Lynch in his book also makes fun of how people worry one minute, for example, about the price of oil going up and the next about it going down.

Meanwhile, the Buffetts and Lynchs of the investing world have ignored the market entirely and instead focused on seeking out individual companies with great stories.  In doing so, Lynch also notes that several of his favorite “tenbaggers” (i.e. stocks that have multiplied in price 10 times over) made their biggest moves during bad markets, not good ones!

I mention all this to simply get investors not thinking about where the market is, has been, or might be headed.  We need to learn from the greatest investing successes of the last half-century and focus on what’s most important – individual companies – and this is usually the opposite of what the masses think is the most important – the state of the market – as evidenced by the insane amount of media attention that it generates.

The same masses who happen to be the mediocre or losing investors instead of the best, most successful ones.

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