WWII 047: How to React to News as an Investor, Including Trump Tweets, Different Types of Voting Shares, Private Fixed Income, Activists in $TIF
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Main Topic: In this episode, I shine the light on nine things to do instead of worrying about Trump tweets.
Here are nine ways to deal with news or Trump tweets that impact your holdings.
1. Stay calm and keep your emotions under control.
There are scientific studies in the field of behavioral finance that clearly show a relationship between the quality of decisions and the level of emotions in the decider.
In short, the more emotional you are, the less rational you will be when making decisions.
2. Always have a list of stocks you want to own and at the prices you want to own them.
Update it every quarter or so. Consider putting these companies on an online checklist
3. You should never be fully out of the stock market, on average.
You may miss a surprise rally like we experienced in the weeks after Trump was elected. Market timing does not work.
4. Update your financial plan.
If you are in or approaching retirement, make sure you have cash reserves sufficient to ride out market volatility
5. Stick with your strategy.
One person will not destroy your portfolio unless that person is you. Accumulate quality business at reasonable prices. Look for arbitrage opportunities
6. Remember that volatility is our friend and we take advantage of it buy buying at lower prices.
Over time, you can train yourself to have the opposite reactions of most people. You want to be joyful of falling prices and not depressed by them.
7. Reduce or eliminate margin buying and debt in general.
I recommend that people stay away from using margin debt to fund purchases in the stock market. Most people will have too much of it at the wrong time and go bust.
8. Don’t assume policy changes will impact companies over-night.
The economy and companies in general have a lot of inertia. It takes a long time for new laws and changes to current laws to be negotiated, agreed upon, voted in, and so on.
9. Look for investment opportunities in industries where there is momentum already that could be increased with policies that seem to be popular and have the best chance to be pushed through
Focus your energy on trying to figure out large trends like population growth (or shrinkage), change in demographics (like Baby Boomers to Millenials), or likely direction of interest rates for the next decade. Once you are comfortable with a major trend, spend time identifying companies that will benefit from this large trends that are selling for reasonable, or cheap, prices.
Ask JB: Where to find industry statistics and data
submitted 7 hours ago by Noah0
JB Says: Check out the companies website, their 10-K and annual report, quarterly reports, investor relations, conference calls. Find out what industry associations are and request a copy of their recent reports.
submitted 2 days ago by ITS_MAJOR_TOM_YO
JB Says: The answer depends on a lot of factors, but here are some rules of thumb. Have one year of living expenses in cash in an FDIC insured account (most bank accounts and savings accounts are insured up to a certain limit). This is your emergency fund in case things go wrong. Also allocate some cash to known large expenses coming up (college tuition, surgery, vacations, etc)/
Other than that, you should keep your cash working for you and have it invested in something.
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Activist Investor Action Alert
Jana Partners is engaging with Tiffany, Inc., the jewelry retailer. Jana has proposed three board directors who all have tremendous experience in fashion and retail. They hope to unlock more value in the Tiffany brand.