What to ignore

Focusing on long term investing means you ignore short term market moves as well as the media hysteria that accompanies them. The financial media exists to sell vie and clicks and the sophistication with which they present data is a veneer. The media’s job is to gain enough eyeballs so that advertisers can pay them more. Do not mistake round the clock news coverage for intelligent analysis.

It is a lot like a person who responds to work emails at three in the morning. Very few good decisions get make at that time of the day and odds are that nothing real or informative is achieved by responding to work emails at that hours. The media often trots out experts who recommend stocks. There are even shows dedicated to buying and selling stock with literate bells and whistles to drive the pint home.

All that these shows do is emphasize the need to trade over the short term. In this sense, the financial media is a lot the night local news. He many times have you heard headlines like a deadly killer in you are, to night at nine? More often then not, these headlines are just baiting you into watching the news. Do you remember what the local new report a year ago? Probably not. Treat the financial media with the same degree of impotence.

Brokers and certain media houses give priority to covering Wall Street analyst report. These report are useful if you want to learn the board brushstroke of a company’s business. If you need to know in depth information about a company’s various business units and how its department operate, an analyst’s report is a good resources.

However, Wall Street, by its very nature, is a short term beast. When these reports talk about buy/sell ratings and earnings projections, they focus on quarterly performance. The concept of figuring out what a business will be worth in ten years is alien to these people. This is because the majority of Wall Street clientele are hedge funds and pension funds. Hedge funds mostly love trading over the short terms and pension funds need these report to determine whether there any asset allocation risk of their portfolios over the short term.

Every Wall Street analyst knows who there are crating reports for. If they started focusing on long term projections, their employers would lose the millions in fees that hedge funds and pension funds pay them. The average retail investor such as yourself, cannot pay this amount of money to justify such coverage. This is why you need to take analyst coverage with large heaps of salt. Use the report to gain high level knowledge of companies, but don not use them to figure out valuations or even sentiment.

This is why we recommend that you remain invested for period of at least five years with ten or fifteen years being ideal. Focus on the business’s quality of the company comes first. This is what creates wealth. Stock markets do not rise linearly, so ignore short term market moves. This includes any pandemic included bear markets or election related volatility.