Focus on 5 things that really matter

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Focus on 5 things that really matter

Post by Rock Private Office on Thu Oct 10, 2013 6:59 am

Sound advice! We get distracted by daily news 'noise'. Things that affect us emotionally, but really should have no impact on our investments strategy.

Extract from original article by Barry Ritholtz here: [You must be registered and logged in to see this link.]

I would suggest that investors turn down the noise and focus on the signals that actually do matter:

1. Valuation: How are stocks valued? Are they cheap or are they expensive? (Keeping in mind that cheap stocks can get MUCH cheaper, and expensive stocks can get MUCH dearer).

2. Trend: What is the economy doing in sum? Is it expanding or contracting? What is the market doing — rising, falling or range-bound?

3. Inflation: What is the overall trend in inflation? Are prices rising or falling or stable — and how rapidly?

4. Earnings: Are companies able to grow their top and bottom lines?

5. Credit: What is the cost and availability of credit?

There are lots of other elements we can talk about — but if you understand these five things and get them more or less correct, you are ahead of 90% of your fellow investors.
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