{"id":59742,"date":"2014-09-03T02:13:34","date_gmt":"2014-09-03T06:13:34","guid":{"rendered":"http:\/\/countingpips.com\/?p=59742"},"modified":"2014-09-03T02:13:34","modified_gmt":"2014-09-03T06:13:34","slug":"dont-sweat-the-small-stuff-when-it-comes-to-stocks","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/09\/dont-sweat-the-small-stuff-when-it-comes-to-stocks\/","title":{"rendered":"Don\u2019t Sweat the Small Stuff When It Comes to Stocks"},"content":{"rendered":"
September 3, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

There I was the other day, doing mental backflips because a share in my SMSF was finally ‘in the money’.<\/p>\n

In other words, my stocks<\/strong><\/a> had finally become profitable for the first time since I bought them over a year ago. <\/p>\n

But in the lead up to this, I’d made the mistake of sweating the small stuff on this one.<\/p>\n

I should know better. I’ve been investing long enough to know how the market works. <\/p>\n

You see, the day after I bought these particular shares, the price fell 1%. That didn’t bother me. <\/p>

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A week later, they were down 5%. Then a month later, they’d lost 10% of their value since I bought them.<\/p>\n

At first, I didn’t let it get to me. The stock traded sideways for a few months.<\/p>\n

I’d check the price and occasionally second guess myself. Was my analysis off? I didn’t think so. I didn’t believe I’d overpaid for the stock either. My number crunching told me the shares were on the cheap side.<\/p>\n

I generally don’t let the small stuff — the daily movements of a share — get to me if I think the company is a good investment.<\/p>\n

Still, I let this one get under my skin a little. <\/p>\n

Again, I should’ve known better.<\/p>\n

Every now and then, a share price going backwards will leave the most experienced investor<\/a> scratching their head.<\/p>\n

These things happen when investing in the market.<\/p>\n

Unless you’re a trader, sometimes you need to remind yourself not to get caught up in the daily movements of a share price. Often this is just market noise that clouds your judgement. <\/p>\n

Sometimes that’s easier said than done. Too often as an investor, you’ll find yourself caught up in irrelevant information. When this happens, it’s easy to question your analysis. <\/p>\n

However, in my case, I got the entry point wrong.<\/p>\n

But I still believed it was a quality business. One that will be a solid company for many years to come. <\/p>\n

This is something investors<\/a> need to remember when adding stocks to their portfolio. Don’t panic over daily movements. And spend your money on quality companies that are likely to be around in a decade or so from now. <\/p>\n

Meagan Evans, Investment Director of Albert Park Investors Guild<\/em>, agrees.<\/p>\n

She recently told subscribers of Albert Park Investors Guild<\/em> that you want to look for businesses that are likely to do well in the future, the sort of companies with solid earnings that can be built on.<\/p>\n

Meagan agrees that it’s all too easy to get caught up in the small details: ‘It’s better not to get caught up analysing short term movements — whether they’re up or down. I look for business that will continue to do well in the long run.<\/em>’<\/p>\n

I don’t think anyone should have a set and forget attitude to their investments. It’s important to take an active approach to your portfolio. But as Meagan says, you shouldn’t waste time analysing daily details. If you invest in the right sort of company, you only need to keep on active eye on your positions.  <\/p>\n

When it comes to companies in it for the long run, what sort of analysis does Meagan apply?<\/p>\n

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‘It must be cash rich,’ <\/em>says Meagan. ‘US discount retailer Wal-Mart, for example, has raised its dividend payment every year for 41 years. It not only paid — but increased — dividend through recession, government shutdowns, wars, real estate busts and even during the GFC. This is the power of a cash rich business.’ <\/em><\/p>\n<\/blockquote>\n

She also looks for companies that can understand the trials ahead.<\/p>\n

Of this, Meagan says ‘A great business will survive and prosper through any threats and challenges. Take Blackberry, also known as RIM. Blackberry failed to adapt. It’s first modern touchscreen phone wasn’t released until 2010 — three years after the iPhone came on the market. Invest only in businesses that recognize the threats and challenges they face.’<\/em><\/p>\n

But don’t ignore the importance of decent management. Meagan says management attitude is what crushed Blackberry and drove Apple [NASDAQ:APPL].<\/strong><\/p>\n

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‘Always look for a quality management team. While Blackberry floundered, Apple soared. Above all, it was Apple’s leadership that made it such a dominant force in the mobile phone market.’<\/em><\/p>\n<\/blockquote>\n

Another sign the business is solid is how they use debt<\/a>. Meagan reckons a little debt for a company isn’t always a bad thing. But it’s important to establish that the debt is low, or that it’s declining. <\/p>\n

As debt drops, ensure the business is growing and not stagnant. <\/p>\n

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‘Make sure the business has demonstrated reliable earnings growth. The amount of earnings created for each share should be stable, if not rising.<\/em> You want to invest in companies that are becoming more efficient, have a solid growth plan, and evidence that it is being implemented,<\/em>’ Megan tells me. <\/p>\n<\/blockquote>\n

This is just some of the analysis Meagan applies when selecting stocks for Albert Park Investors Guild<\/em> portfolio. The message is simple. If you invest in solid companies, you won’t have to sweat the small stuff.<\/p>\n

Shae Smith+<\/a>
\n Contributing Editor, Money Morning<\/em><\/strong><\/p>\n

Ed note:<\/strong> The above article was originally published in Pursuit of Happiness<\/em><\/a>. <\/p>\n

From the Port Phillip Publishing Library<\/em><\/strong> <\/p>\n

Special Report: The explosive investment style providing consistent opportunities to thousands of Aussies…<\/a><\/p>\n

The post Don\u2019t Sweat the Small Stuff When It Comes to Stocks<\/a> appeared first on Stock Market News, Finance and Investments | Money Morning Australia<\/a>.<\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n


\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au There I was the other day, doing mental backflips because a share in my SMSF was finally ‘in the money’. In other words, my stocks had finally become profitable for the first time since I bought them over a year ago. But in the lead up to this, I’d made the mistake of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-59742","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/59742","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=59742"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/59742\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=59742"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=59742"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=59742"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}