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Taper? What Taper?

Question mark This morning, the United States Federal Reserve announced that it will start cutting down, or tapering, its $85 billion-per-month bond-buying program by $10 billion next month onwards.

The Dow Jones Index (DJINDICES: ^DJI) closed up 292.7 points or 1.8% after the announcement. Yes, you read that correctly. The market did not react one bit. In fact, it seemed like the market was whispering, “Taper? What taper?”

In our sunny island, at 09:30am this morning, the Straits Times Index (SGX: ^STI) was up 0.7% at 3,083.31 points. It is the exact same market that fell 1.5% last week due to fears of tapering. In fact, it had had four straight “down days” from Monday to Thursday, before breaking the trend on Friday.

We can draw a major lesson from the manic-depressive mode of the market. That is, timing the market is futile, but time in the market is what matters.

The market can be irrational as seen from the episodes last week and this morning. By trading in and out of the market, we are only making our brokers rich.

When we view stocks as business rather than as a paper to be traded, we would not be bothered one bit by Fed’s activity or inactivity.

Walter Schloss once opined, “Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.”

Despite the tapering, there will still be coffee connoisseurs sipping coffee from Super Group (SGX: S10). There will still be newly-married couples shopping for the refrigerators at Courts Asia (SGX: RE2) and ramen lovers will still patronize Ajisen Ramen owned by Japan Foods (SGX: 5OI).

Foolish Bottomline

We cannot predict what the market will be doing the next moment. It can go up, like what happened this morning and drop as fast as it has risen. The only thing investors can do is, in Winston Churchill’s words, “Keep Calm and Carry On”. Do not time the market and buy businesses, not ticker symbols.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.