In another post, I compared the nature of the stock market to an ocean. Well, days like today are much like the waves on an ocean and also the weather outside my window, very turbulent and unsettled. In fact, I would say that the market today is quite irrational compared to anything else in recent memory. For example, how else can you explain stalwart Disney (DIS) making the 2-day drop that it has with really an insignificant misunderstanding in its quarterly report regarding ESPN while the financial disaster known as 3D Systems (DDD) surges over 15% on yet another lousy quarterly report?
I’ll have to admit that days like this that can be hard on me, but only when I start focusing on the trees instead of the forest. Here are some things that help keep my mind off of the weirdness of days like this and back onto the long-term picture:
Shut off the news
On days like this, no news really is good news. Don’t bother watching the financial news or anal-yzing stock prices. Starting to worry or obsess about the irrational fears of short-term investors (gamblers) might lead you to make a mistake, like selling one of your solid holdings that’s made a drop of several percent on temporary or frankly insignificant “bad” news.
Consider why you bought in the first place
In the case of Disney, I look at the fact that it’s still a cash-gushing machine with yet another blockbuster movie around the corner, theme park attendance growth despite an admission price increase, plus a new theme park opening in China next year, and realize that a short-term dip in share price is absolutely foolish to worry about. Again, it looks very irrational when compared with the facts.
Open up your war chest
Whereas the average investor looks upon days like this with worry, above-average investors like you and I look at them with a grin on our faces. Why? Because it’s like walking into your favorite store and finding a bunch of your favorite items on sale! On days like this, the smart investor looks for the biggest bargains and deploys some cash into his favorite stocks.
For example, Disney and XPO Logistics (XPO) have become an absolute steal within the last couple of days, and if you buy a position in them now and hold for even a few years, you’ll very likely be glad that you did. Again, Disney is a global media monster and the CEO of XPO has successfully executed his same strategy with other companies in the past with mind-blowing results.
If you don’t have any money set aside, then hopefully days like today are a lesson to set some aside when the market is stronger so you can hunt for bargains when it is weaker.
Find something else to do
I’m not helping my sanity too much by sitting here, thinking and writing about the market’s antics today. But once I’m done, I plan to occupy myself with other activities, ones that don’t involve checking my Stocks app, for example. If it’s a day off, go cut the grass or take the kids to the beach – anything to get your mind away from the market’s temporary troubles and onto much more important matters.
The bottom line is that a solid company’s strategy has a time frame of several years, so why make your investing time frame any less? Along the way, there will be bumps due to market emotions or, like today, concerns about the start of another recession. But if these bumps are not due to anything about a company’s finances or long-term outlook, then why give up on that company?
If you align your investing time frame with that of the best companies on the planet, these storms will quickly become distant memories and completely insignificant in the long run.
One last thing: be sure to click the Follow button near the top of this page. Also, if you’re a brand-new stock investor – or still thinking about it – then I highly recommend starting with my 5-part Stock Starter Series. To new beginnings!