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Is There Something to Worry About?

Peter Lynch was the head of the US-based Fidelity Magellan fund in 1977, where he managed to deliver 29% annualized returns for his clients over 13 years. To put this into perspective, every $1,000 invested into his fund would have turned into $27,200 over his 13 year tenure.

In his bestselling book Beating the Street, Mr. Lynch listed down “25 Golden Rules for Investing.” One of them, Golden Rule No. 18, went like this:

“There is always something to worry about. Avoid weekend thinking and ignore the latest dire predictions of the newscasters. Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling”

Things to worry about

When it comes to news on the economy, it would seem like we have plenty to worry. Last week, a news article came out about how low oil prices were apparently bad for the US economy and subsequently, the world economy. The newswire went on about how falling oil prices could ultimately hurt US exports, employment, and spending. In summation, the article mused about how sharp falls in energy prices were a symptom of weak economies, and the benefit of lower fuel costs wasn’t going to be enough to offset the effects.

That’s pretty remarkable “news” for me.

This is because I remember reading a few years ago about how high oil prices were actually bad for the economy. In fact, a Washington Post newscast from 10 March 2011 spoke about how high oil prices were “slowing global economic growth”.

Let’s just say that is quite the contradiction with last week’s “news”.  It’s no wonder that we can always find “something to worry about”.

(By the way, for those who would like to learn more about the low oil prices, you can read more about oil prices here, and their impact on the oil and gas companies here.)

Foolish take away

At the face of these contradictions, there is another quip from Peter Lynch which may sum up our experience with economic news. He said:

“If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.”

It goes to show that individual investors who react by selling at the wimp of general economic news might find themselves missing out on some sweet gains. For instance, shares of Boustead Singapore Limited (SGX:F9D) and VICOM Ltd (SGX:V01) have risen by 82.3% and 96%, respectively, from 10 March 2011 – the day of the Washington Post report – up till 21 October 2014. Boustead is a technology group focused on geo-spatial solutions and infrastructure-related engineering while VICOM is a technical testing and vehicle inspection company in Singapore.

It follows that Foolish investors might want to tune out the noise from the media, and instead, use that extra time to study the underlying business behind a share ticker. If Foolish investors choose to do that, they may just find the learning experience to be way more fun than worrying about oil prices. If you’d like to learn more about investing and keep up with the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool’s weekly investing newsletter, Take Stock Singapore. It will teach you how you can grow your wealth in the years ahead. Also, like us on Facebook to follow our latest hot articles.

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