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Turn Out The Noise

As investors we are constantly bombarded by noise disguised as news, or even worse, investment advice.  To be a successful investor over a long duration it is imperative to tune out the noise and stay disciplined.   This photo taken of my television one year ago today is a prime example why…

It shows Bill Gross of PIMCO, a highly acclaimed and undoubtedly savvy money manager based on his successful track record, appearing on Bloomberg Television.  As the caption explains – he told investors to sell dividend paying stocks in the 3-4% yielding range.  It is quite possible many investors actually acted on this information – selling these types of stocks – based on the fact the suggestion was coming from a noted investment ‘guru’.  But acting on these kinds of sound bites becomes dangerous, even when coming from ‘legitimate’ sources.  Screening for all stocks within the S&P500 that yielded between 3% and 4% at the end of last November when this picture was taken, and running their performance through yesterday’s market close, shows the average return of the 74 stocks fitting his category returning a very powerful +34.1%!

This quote from Warren Buffett, in Berkshire Hathaway’s 1987 Annual Report (emphasis mine) came immediately to mind…

“… an investor will succeed by coupling good business judgment with an ability to insulate his thoughts and behavior from the super contagious emotions that swirl about the marketplace.”


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