“In 53 years we never had a discussion about macro affairs when buying or selling stocks.There is always going to be bad news“, Warren Buffett.
If the greatest investor of all-time is telling you to ignore the headlines, you should listen. While macro issues are important, the future is unknowable so stop wasting time worrying about events you cannot control. Don’t sell a stock because you are worried about the “Fiscal Cliff” or a “Grexit”. Nobody knows what will happen next nor how it will affect your portfolio. Your attention should be focused on what is important and knowable. What is important to your portfolio is to own companies that sell products and services that people cannot live without. What is knowable is a company’s current valuation, dividend yield, revenue growth, balance sheet health and other fundamentals. Before you buy a stock, ask yourself this question. Can I figure out a way to kill this company dead? If there is no easy answer and the company is trading at a reasonable valuation, you should buy its stock. Sell a stock only when it is clear that its business won’t stand the test of time or when its valuation is stretched to well above its historic multiple. I can guarantee that there will be an endless stream of bad news throughout your investing career but I can also guarantee, you will be a better investor if you have control over your decision-making.