Why Joe Investor Can Beat the Market

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

The belief that a deal can be struck to avoid hitting the debt ceiling and end to the government shutdown has for the second straight day pushed stocks higher on Wall Street. When the closing bell rang this afternoon, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) sat higher by 111 points, or 0.73%, while the broader S&P 500 moved higher by 0.63% and the Nasdaq gained 0.83%.

As you can see from the chart below, the markets took investors on a ride this week as they fell Monday and Tuesday, traded slightly higher Wednesday, and then were off to the races Thursday and Friday.

^DJI Chart

^DJI data by YCharts.

The moves highlight how irrational the markets really are, despite the fact that many investors still believe that with all the powerful technology and "smart" people on Wall Street, stock prices are always fairly valued and the market is efficiently pricing assets. With that said, the idea that the average investor who is willing to ride out the bumps in the road can beat and, in a number of cases has beaten, the markets. The most important thing to remember is that 99% of what moves the markets on a day-to-day basis is just noise and should be tuned out. If you focus on the business fundamentals (i.e., earnings reports, strengths, weaknesses, etc.), you can pick long-term winners.

Now let's take a look at a few of the Dow's losers today and whether you should care about the moves lower.

Shares of Boeing (NYSE: BA  ) fell 0.77%, which may have been caused by the fact that three more of the company's 787 Dreamliners had major problems this past week. This is certainly not the first time the 787 has had an issue and that may be causing investors' concern today. The plane has had a number of both small and large problems since the start of 2013 and the longer issues continue to be reported, the worse things may get for Boeing. As of now, we have yet to see any major order cancellations for the fuel-efficient aircraft, but this week was also the first time we saw a historically loyal and large Boeing buyer decide to go with the competition when Japan Airlines placed an order for 31 Airbus A350s, which will replace its fleet of Boeing 777s.  

For Boeing investors, the sell sign isn't yet lighting up, but if Airbus continues to encroach on Boeing turf, orders begin to be canceled, or we see a string of large problems with the 787 arise, shareholders may begin to consider when to get out.

Shares of JPMorgan Chase (NYSE: JPM  ) declined a meager 0.02%. The move came after the company reported its first quarterly loss since Jamie Dimon became CEO. The bank reported a third-quarter loss of $0.17 per share, or $380 million, after taking a $9.2 billion hit from litigation expenses during the quarter, which has not yet been paid but just set aside for future expense. When you exclude the litigation expense, the bank made $5.8 billion during the quarter or $1.42 per share, well above the $1.19 analysts expected. So that should make shareholders feel better about the loss, but they need to remember that the bank has placed $23 billion in reserve to cover future legal costs, including the $9.2 billion it moved this quarter. This is certainly news investors should be paying attention to, but at this time, it's unlikely these problems will affect JPMorgan's business.  

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