Don't Let the Fed Rule Your Decisions

 | May 23, 2013 | 2:00 PM EDT
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Dare I say that at the conclusion of today's market trading hours, the market will have declined significantly for two straight days?  It seems so long ago since 2008, doesn't it? I've said before and I'll say it again -- don't let the actions of the Federal Reserve dictate your investment decisions.

All it took Wednesday for the market to go on a 230-point swing in a very short time were comments from Fed Chairman Bernanke suggesting that in the next few months the Fed would be taking a closer look at its bond -buying program. The market decline Wednesday was only blunted by the 4 p.m.  market close.  

I suspect that a few days will go by and the market will pick right where it left off. Where else is the money going to go? Bond rates are creeping higher as the selling pressure ramps up. To many others, the idea of holding cash, when it seems so easy to earn 2% to 3% a month trading stocks, is just not an option. Or, I could be wrong and this could be the beginning of a prolonged market pullback.  

Since I have no clue -- and no one else really does either -- you stick to what matters: Paying a sensible price for any investment you make. I commented Wednesday on how price paid determines the return on investment, regardless of the quality of asset. Hewlett Packard (HPQ) confirmed my point. Shares were up despite the Fed induced sell-off. Even better, the company announced a stronger outlook after market and shares are up 10% in pre-market. The share rise is due to the better-than-expected news but the magnitude of the advance is a result of a severely-depressed stock price.  

If the market is about to take a breather, take a few minutes to look some of the most popular "buy at any price" stocks today. Odds are they will decline much more rapidly than unloved or mispriced names like HPQ, Gentex (GNTX), General Motors (GM), and the like. I can't predict the future; my prediction may prove wrong in the short run, but in the long run, the odds are always on the side of value. The person who pays less always comes out on top, whether that means achieving higher gains or experiencing a smaller loss -- both of which ensure longevity in this business.  

If you pay attention to the macro but base your specific investment decisions on the micro economic factors, you won't have to worry about how to time the market day by day or hour by hour.

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