It's easy to get confused when you read or hear various experts' stock market forecasts. Some feel bullish, while others see disaster around the corner. However apt fears of an imminent implosion may seem, they actually reflect a short-term mentality that doesn't serve most investors well.
The simple truth is that no one knows what will happen in the stock market in the short term. Lots of people will offer guesses and opinions. Depending on their stature or reputation, you might stop to listen -- but very often, they'll be wrong. The 2008 stock market implosion took many people by surprise -- experts included. At the end of 2007, for example, most top-rated investment newsletters offered bullish outlooks for 2008. Oops.
Stay focused
The best way to deal with short-term market calls? Ignore them. You should only be invested in the stock market with money you won't need for at least five or 10 or more years. Besides, unless you're investing mainly in index funds, what really matters is how your particular stocks perform over the long haul.
Consider fiber-optics and glass giant Corning (NYSE: GLW). If you like its prospects in an age of booming fiber-optic networks and rising demand for flatscreen TVs, think twice before you entertain fears of a stock-market drop. Even if a plunge does arrive, it won't change the health or promise of the company -- it'll just make things a little more difficult for the company for a while. Similarly, if you expect more and more hospitals to buy Intuitive Surgical's (Nasdaq: ISRG) robotic surgery equipment over the coming decade or two, and you like its dominance in its field, you shouldn't fret too much about a possible short-term correction. After all, market drops give you a chance to scoop up many great companies at great prices.
Bucking trends
Even when the market drops, some of your holdings may buck the overall trend. McDonald's (NYSE: MCD) did so in 2008, rising 8% when the S&P 500 lost 37%. That's at least partly thanks to its role as a low-cost venue, attractive to consumers in times of financial stress. Wal-Mart (NYSE: WMT) and Family Dollar (NYSE: FDO) also gained in 2008 -- 9% and 20%, respectively -- further supporting that thesis.
Don't pay much attention to short-term market calls, and don't let long-term bearishness worry you all that much, either. If the market suffers a drop, ask yourself whether your holdings are likely to keep making money, and whether their health or promise has suddenly changed for the worse. Invest in companies that look like long-term winners, despite inevitable market turns.
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