Don’t invest based on negative news

Something I’ve discovered when I began researching stocks deeply back in 2012: there is ALWAYS bad news. Doesn’t matter what stock you investigate. You will find bad news lurking around every corner.

It can quickly scare you away from investing in really solid companies. One of the most solid stable companies I know about is Coca-Cola. I would own some myself, except I invested in other stocks before I became seriously aware of KO’s amazing profit growing ability. I basically didn’t have the cash to start and my spare cash currently is targeted at being applied to my real estate portfolio and my EIUL.

But what happens when you add KO to your iPhone’s Stocks app and check out the news articles linked every day via Yahoo? It seems just about every week, if not every other week, someone is writing an article bemoaning the decline of soft drink consumption. Sometimes they write it and sometimes they don’t, but you are supposed to infer that this might be the time to bail on holding soft drink companies. The world is getting wise to soda, and it won’t last forever. Sorry, but KO hasn’t stopped creating millionaires yet.

Some of the other companies I’ve invested showed various dips. One of favorite examples is the first stock I bought back then: General Dynamics (GD). I bought it at $72/share. My core reasons for purchase were that GD had a strong history of earning profits and making dividend payments. On top of that, I asked myself what the odds were that they would stop making aircraft? Very low! Well, almost immediately after purchase, their price dipped down to $66/share. That scared the heck out of me! But I stuck with my analysis and held on. Today it’s trading at $117/share. Further more, I originally bought 130 shares. Now I’ve picked up an extra 3.1 shares simply by clicking on the “reinvest” button. Total growth: 60% in two years.

To add to this, don’t forget that when companies do go under, they don’t simply go POOF! Companies are actually big entities with lots of holdings. As they adjust to any current fiscal climate, they can make changes, sell of assets, refashion plans and more. Since you own a piece of that company, you will be given pieces of sell offs, splits, etc. These other companies can sometimes do quite well on their own. It may be that these various components didn’t work well when they were under one roof of management. Your equity in the company doesn’t simply evaporate because the core company trends downward.

So don’t forget to do you in depth analysis and understand fundamentally what you’re investing in. Don’t let the highs and lows of daily news drive your investment plans.

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