There is a lot going on in the world right now – pick up any newspaper or spend a few minutes online, and it seems the world is changing right before our very eyes. Whether we’re talking about technology or Egypt or natural disasters, uncertainty can be as thrilling as it is unsettling. Naturally, when we are startled by news events, our automatic reaction is often to overreact and start selling investments.
I’m currently working with Melanie, a business owner whose goods and services can be impacted greatly by a constantly shifting world. Like so many others, she needs to always be prepared to make adjustments in her portfolio to reflect events that happen in the economy and around the world.
The first thing you should do when there is a newsworthy event is analyze the long-term impact on earnings of companies and how that impact will trickle down to your bottom line.
A recent example of this is the unfolding events int he Middle East and their impact on oil prices. Stocks tend to move six to nine months ahead of earnings and economic data. So, with oil prices moving higher due to unrest in the Middle East region, many people believe that they need to sell their stocks immediately.
But if you took the time to analyze this situation you might see that the impact on earnings would be minimal, and the long-term growth of the market may remain intact. This is a good example of “looking before you leap” by analyzing the current situation. And this is the type of advice I’d give Melanie before she starts falling into the knee-jerk trap that will undoubtedly impact many like her.
there are few “sure things” when it comes to investing, so listen up, because this is as “sure things” a statement as you’ll ever read: The best way to protect yourself is through knowledge and education.
There will never be a day when there isn’t a headline that makes us concerned about the economic well-being of the world economy. But there also never come a day when the perfect tool for grappling with that uncertainty is anything other than careful study and analysis.
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
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Tags: Earnings, economy, ed butowsky, investments, market, middle east, portfolio, sure thing