Invest for the long term and avoid temporary troubles - Sarasota Herald-Tribune

Sometime back a marquee outside of a local restaurant caught my attention. It said, “Be careful about following the masses for sometimes the letter m is silent.”

Those words succinctly describe what happens every time the markets exhibit increased volatility. So, each time the Street vents its frustration, sending the major market indices into a temporary tailspin, should you react? The answer is no.

There is no need to regurgitate the continuing negative effect the coronavirus or COVD-19 is having not just on the stock market but on our daily lives. Unfortunately, the impact on both is likely to continue for some time.

Does that mean my views on equity investing have changed? Absolutely not. If your research has given you confidence in the long-term future of a company, (2 to 3 years), use the current volatility to buy when others are selling.

Yet, whenever there is a market downturn the Chicken Little syndrome comes into play with every financial Paul Revere shouting, “the correction is coming, the correction is coming!”

The fear of impending doom is often a promulgation of theories utilizing indefensible assumptions grounded on questionable data. So, what is your defense? Regardless of the veracity of innumerable market theories, having a combination of patience and fortitude remains a necessity.

An investment methodology focused on capturing dividends has historically helped insulate portfolios from market declines, while utilizing the recommendations of prognosticators without doing your own research is fraught with risk

Thanks to the First Amendment anyone can, without recrimination, go off half-cocked blathering prose that is tantamount to carrying a sign saying, “Repent now, the world is coming to an end.”

One investment house was given to state that it is delusional to think you can expect to increase your wealth by investing long term. Such comments are often followed by the often incorrectly sourced quotation from John Maynard Keynes, “In the long run we are all dead.”

Interestingly, Keynes’ statement appears not in his meteoric work, “The General Theory of Employment, Interest and Money” — as many mistakenly state — but rather in his 1923’s “Tract on Monetary Reform.” Discussing the fallacy of returning to a gold standard, Keynes wrote, “...the long run is a misleading guide to current affairs. In the long run we are all dead.”

And speaking of dead, I can remember when much of the world had pretty much given Apple up for dead. In 1968, Stan Dolberg of Forrester Research wrote, "Whether they stand alone or are acquired, Apple, as we know it is cooked." (I found the article through David Pogue's column "The Desktop Critic: Reality Check 2000" in Macworld Magazine, where the quote still resides.)

A little over a year ago, when I was writing about the future of Apple, I read that the German investment firm Berenberg set a price target for Apple at $60. Berenberg believed that Apple's financial model was too reliant on the iPhone and predicted at the time that the company's shares would plummet more than 50 percent. See what I mean about diviners of Wall Street.

Recent market activity saw Apple playing a significant role in one of the latest market rallies. Shares of the iPhone maker climbed 9.3%, the stock’s largest one-day move in more than 11 years.

Apple shares have been under pressure since the company’s mid-February announcement that it no longer expects to reach its previous March quarter revenue guidance of $63 billion to $67 billion, due to a combination of coronavirus-related supply chain and demand issues in China.

While Apple’s warning spurred Wall Street analysts to cut their sales estimates for the March quarter, the consensus forecast has dropped to about $61 billion. I believe Apple is seeing demand delays, not demand destruction, with no fundamental changes to its long-term outlook.

Apple’s incredible past success has resulted in brand recognition, desirable products, and a loyal consumer base willing to pay a premium. Yet, there is no dearth of naysayers who are convinced that Apple will be incapable of continuing its strong pipeline of new and innovative product launches.

Not true. Apple continues to shore up its product line with a move towards a variety of new services.

Lauren Rudd is president of Rudd International, an asset management firm. Neither Lauren Rudd nor his employees hold any shares discussed or have plans to buy them within 30 days, nor is there any intended inducement to buy or sell any security. You can write to Lauren Rudd at Lauren.Rudd@RuddInternational.com or call him at941-706-3449. For back columns, go to heraldtribune.com/business/columns. Lauren Rudd offers commentary Thursdays on SNN News 6 during the 5:30 p.m. live newscast.

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Invest for the long term and avoid temporary troubles - Sarasota Herald-Tribune
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