“Don’t look… That stuff will kill you!”
Last week, I boarded a plane with my wife and three boys. We were heading to New York to spend some time with family.
Now, we always have to split up: three of us on one row, and two on another. So we draw straws—and the two short straws get the middle seats. (My wife and I always get the short straws by default.)
On this trip, I sat with my 8-year-old son, Liam. He split his time between playing games on his iPad and staring at the clouds out the window. Meanwhile, I struck up a conversation with my aisle-seat neighbor, Aaron.
(My wife will be the first to tell you: I love talking to people—including most strangers. Sorry, mom!)
We talked about our personal and professional lives. Naturally, the subject of the markets came up. And after finding out what I did for a living, Aaron was very interested in my take.
I told him it’s important to follow the big players in the stock market. You see, the “smart” money usually leads us to the best companies out there.
Then, we glanced at the chairback TV screen. An inflammatory headline about an oil tanker attack jarred us for a moment. (The U.S. accuses Iran of carrying out the attack in the Persian Gulf. Of course, Iran denies it.)
That’s when I turned to him and said, “Don’t look… That stuff will kill you!”
Now, regular readers probably know where I’m headed… The best investors don’t let the headlines affect their decisions. In fact, they ignore them completely.
But like many Main Street investors, Aaron trades in and out of stocks. And today, I’ll share the advice I gave to him. Plus, I’ll tell you what the smart money is doing right now…
Every Investor’s Biggest Regret
Like many investors, Aaron had many regrets. They all came from selling too soon based on the headlines.
Basically, he sold too soon out of fear. And as I told him, that’s the worst mistake investors can make.
You see, the media are in the business of selling ads. They know people are drawn to negative stories more than positive ones. So they’re incentivized to scare you to death.
I pointed to the market’s recent rocket-like recovery after May’s tumultuous sell-off. Since the beginning of this month, the market is up 5.7%—near its all-time high again.
Look, I understand… It’s tough not to panic when the market whipsaws back and forth. But here’s how I told him to handle it:
I look at stocks like I do my kids. If Liam has straight A’s this year, but sinks to B’s next year, I won’t sell him (in a metaphorical sense). Instead, I’ll pay close attention and let him sort through his performance issues. I know my kids are great. And part of parenting is letting them develop on their own.
Well, stocks are no different. I have a system to identify the “straight-A” stocks from the start. You see, it’s a much harder game to pick C and D stocks… hoping they turn into A and B stocks.
So by fishing in the rich side of the pond, I can be more patient and confident. I know the good stocks will ultimately rise to the challenge—despite what the headlines say.
And with this philosophy lesson behind us, let’s quickly check in on the markets…
The Market Is Cruising
Growth led the way with the biggest gains this week. You can see that in the table below, with the tech-heavy Nasdaq outpacing the other indexes…
If you follow me regularly, you know my proprietary stock-picking system scans nearly 5,500 companies every day—looking for the best of the best that big institutions are buying up.
And the next table below ranks the market sectors based on my system’s criteria—including buy and sell signals. In other words, it shows what the smart money is likely buying and selling each week.
As you can see, financials, health care, and consumer discretionary logged the most institutional buying signals last week. Meanwhile, energy continues to see selling…
So the market is cruising along. As always, be suspicious of the headlines. They’re simply designed to lead you to advertisers.
And remember, treat your stocks like you do your kids. You’ll end up trading a lot less often, spending a lot less, and making a lot more in the long run.
Stay bullish,
Jason Bodner
Editor, Palm Beach Trader
