Education

block out noise

Why investors must block out the market noise and focus on the quality of the company


Forget about the media and macroeconomic racket. What’s important is underlying financial strength.

 

In this article, Lincoln Indicators discusses:

  • How a focused and disciplined share market strategy will drown out the day-to-day market noise.
  • Why market downturns are an opportunity for savvy investors and not a threat.
  • How the best companies on the ASX will always recover first.

Every day, Australian share market investors are literally bombarded with noise.

As media outlets broadcast events on global markets overnight, local investors are often given a cursory view of what might happen during our own trading session. If offshore markets were down, ours will be tipped to fall as well. Conversely, when offshore markets rise, the Australian Securities Exchange (ASX) will be expected to follow suit. But that doesn’t always happen. More often than not, the daily predictions are totally wide of the mark.

Market forecasters will fill your ear, never your wallet

The constant stream of market and macroeconomic news, commentary and analysis, from experts, so-called experts, and those best described as financial quacks, is incessant, and largely designed to invoke fear. Unfortunately, it only serves to give investors a reason not to invest in the Australian stock market’s great companies.

Of course, by listening to uninformed and often inexperienced commentators, susceptible investors will invariably miss out on the opportunities the market presents. Because, while markets will always rise and fall on a daily basis, it’s the long-term that really matters. Those investing with a short-term mindset have little chance of generating real wealth – wealth which can only be created over the longer term using the power of compounding returns.

Being guided by fear is the worst possible strategy for share market investors, which is precisely why all the most successful investors in the world choose to block out the daily noise and stick to their long-term investment disciplines and objectives.

If anything, they are able to harness market fear and use it to their advantage. Experienced investors often buy into quality companies at heavily discounted prices when panicked investors, spooked by the market noise, choose to sell out, sometimes at a loss to their initial purchase price.

The world’s most famous investor Warren Buffett famously said, “No adviser, economist, or TV commentator can tell you when chaos will occur. Market forecasters will fill your ear but will never fill your wallet.”

Investing on the share market is all about being proactive. At Lincoln Indicators, we don’t advocate a strategy of buying and holding forever, nor selling because of macro noise. Sometimes it will make sense to sell based on a company’s fundamentals, and that’s why active portfolio management and optimisation, relative to your objectives, is imperative.

Economic turmoil is nothing new

Most macro issues have always been constant, and always will be.

As Lincoln founder Dr Merv Lincoln stated: “The share market is a resilient beast and always finds a way to recover, because it is the underlying micro strength of the companies that drives the market over the long term, not macroeconomic factors that get in the way and cloud our judgement.”

Savvy investors see market volatility not as a threat, but as a great opportunity to buy into high-quality companies at heavily discounted market prices when market events work in their favour. Over time, they invariably reap the rewards.

It’s all about fundamental financial strength

After all, history shows us that even when markets fall sharply, the best companies will be first to recover and deliver strong returns to investors over the long term. It’s a matter of having the foresight and discipline to cut through the media and macroeconomic noise, and to focus on the investment fundamentals.

At Lincoln Indicators, we help you to be disciplined and to block out the market noise by:

  • Providing you with the financial tools and research to cut through the distractions and to weather all conditions.
  • Providing the 9 Golden Rules framework to keep you aligned to your objectives at all times.
  • Providing sophisticated portfolio construction, management and optimisation tools.
  • Providing education and support to keep you focussed, including weekly and monthly messages, educational webinars, masterclasses, and one-on-one training and support.

Our team is always here to help. If you would like to discuss this article in more detail or would like more information on Stock Doctor or our Managed Investment Solutions, please contact us on 1300 676 333.

Tim Lincoln

Successful Investment Strategy White Paper