Stock investors, by and large, over-react to every piece of data that reaches their eyes and ears. And in this age of 24/7 business television, bloggers, news groups, Twitter and an endless drizzle of digital drivel, the data points never stop. As a result the over-reactions are more frequent and of higher intensity. That's bad news for the worry-warts whose investment strategy is akin to the non-stop action of a ping-pong game, but it's good news for folks who have a consistent and well thought-out approach to building wealth.
Worry wart investors would have sold Fluor (FLR) in mid-December at $39.86 and missed its run-up to today's $49.50. TV prognosticators at the time said, and I quote, "Fluor is a broken stock. Stay away." Apple investors who sold on Friday at $205 are kicking themselves when they see today's price of $215. Why did they sell on Friday. Because "analysts" (and I use the term very loosely) said the stock had gone up too far too fast. They said Apple had more than doubled in 2009 and there was little to no upside ahead. And the buzz over the new Apple Tablet was criticized as all hype and the device was widely derided as another "Newton" (i.e., the Edsel of technology).
The trick is to do your own research and make your own decisions. If the markets were truly efficient, Apple would never go up or down $10 in a single session. Use this inefficiency to your advantage. When the noise is negative but your research is positive -- go with the person you trust: yourself.
For more investing insights, please take a look at my new book "Your Nest Egg Game Plan" or visit my website at www.HardWorkingMoney.com.
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