Market Myths & Realities: What Counts?


Hi, I’m John Healy, Chief Investment Officer of Healy Wealth Management. Today, I want to talk a little bit more about Market Myths and Realities. One of the big myths is that you can predict what the market or the economy is going to do, and that’s just not true. Nobody can consistently predict what the stock market is going to do in the short run, or what interest rates are going to do.

The reality is that no one can predict the short run movements in the market or the economy on a consistent basis over a long period of time. How do you do well in the markets? How do you invest? As I said before, you focus on what counts, just like going into any market. Imagine going into a supermarket: you go in there to buy products and you don’t want to pay too much.

We do the same thing when we invest in anything, like investing in businesses or stocks. But when we go into the stock market, we’re looking at businesses. We don’t even really want to look at the price until we evaluated what we think the value of the business is. So how do you value a business? Value of a business is based on its profitability.

If a company that doesn’t have any profits or is losing money, there’s not much value, if any, in a business like that. So, what we want to do is be confident that the company is truly profitable, that it has a demonstrated track record of profitability. We don’t invest in businesses that don’t have profits. Now, there’s nothing wrong with that- but you must be confident that a company will be profitable at some point.

Now, it’s a lot harder to figure out if a company will be profitable if it hasn’t demonstrated it already, so that’s first and foremost. And then we look at the business and say, is this sustainable? Are we confident that it will continue on some level to be profitable in the future, and if so, at what level?

We’re human and we want to make a quick buck. We as humans would rather get rich quick than slow. The problem is, making money in the short run is a lot harder than following a discipline and doing well over the long run. At Healy Wealth Management, we’re always looking at what is the true underlying profitability of the business. What are the earnings today, and where do they fall in that level of earnings that a business is generating? That’s what we pay attention to. That’s what counts. That’s what matters.