Does it really matter what the overall stock market does? Are we okay as long as we picked good stocks?

Yes, it does matter.

3 out of 4 stocks follow the market sooner or later. It's safer to go with the flow and buy stocks when the market is in an uptrend.

Technically, no, it doesn't matter what the market does as long as you picked good stocks.

Realistically however, very few people can pick good stocks. Even the professionals have a tough time doing it. Most people forget that a good stock is NOT the same as a good company.

And another thing to note: historically, individual stock pickers do *worse* than the markets...

Basically, The only 2 times that really matter are the day you buy and the day you sell. You want to buy that stock at a time when it's depressed and no one wants it, then sell when everyone wants it.

Same goes for mutual funds. I have made a lot of $$ using this philosophy.

You're okay as long as you pick good stocks. The problem is identifying good stocks. Experience teaches that very few people are capable stock pickers. For every Warren Buffett, there are hundreds and thousands of mediocre money managers who can't beat the overall stock market. If you're an exceptional stock picker, or you find an exceptional stock picker to invest with, you'll do well. But otherwise, you may find out after losing a lot of money that sticking to market averages would have been a better idea.

Well, your good sticks do not exist in a vacuum, if people lose money in the market, they will have less to put into your good stocks. Also, there will be less money around to buy the products or services of your good company.

In sum, a downturn in the over-all market can hurt your well-chosen stocks.

And of course... how do you know your stocks are well-chosen?

If you're outperforming the Dow, S&P, and Lipper average, you are outperforming the market and if the market were down 12% and you are only down 10%, then you outperformed the market, but that does not necessarily mean you picked good stocks.

No, it does not matter what the market does as long as you are making money. Like Cramer says, there is always a bull market somewhere and if you are good enough to position yourself in stocks that go up after you buy them, no matter what the market does, then nothing else matters.

Buy some ADVNB, been beaten down lately for nothing and is a great business with solid management and great dividend history.

It doesn't to me. I make money in the market whether the market goes up, down or sideways. It's a beautiful thing!

Yes, in general, but if you overpaid those "good stocks"
they will suffer also when the market is bearish.

Therefore, it would take a desperately long time before
you start to gain something, and even more time before
that gain compensates the inflation during the period.

Good stocks are OK only when

1) they are really good, this a matter of serious analysis
of their record, their situation, their prospects and their
adaptability to evolutions (which rests on their management)

2) they are not too expensive

3) as an investor, you have a long enough "time horizon"
.

If you are a good stock picker, then yes, your stocks could even prosper during downturns. However it does matter to an extent what the overall market does because when most people are losing money and panicking, it will affect their behavior, which will affect the overall economy.

Example, if someone is near retirement and all of a sudden the market is way down, and his portfolio AND 401(k) have dropped like a rock, he is likely to alter his behavior. He may delay retirement--not necessarily a bad thing as we have overall low unemployment. He may stop donating to charitable causes--at a time when need is likely up. With the number of people who then will scream we need the government to do more, that means more taxes and more interference in our lives. He may decide to put off some major purchases he was planning on making--that means sales lost, probably locally.

The negative attitude that is fostered can put people off of opening new businesses, making investments in our country, etc. We want to grow our economy, not hold still or decline.

Ultimately, it can affect OUR stocks. Look for example at how our greedy government CONSTANTLY wants to put extra taxes on the oil companies. This drives up the cost of doing business, which means less oil will be found and processed in the US as the profit is gone. Uncle Sam babbles like an idiot about "windfall profits" but when well after well goes dry or the new find is nothing you don't see him shelling out money. Considering how much of the cost of a gallon of gas is taxes (in excess of the PROFIT the oil company gets), it's worse than the pot calling the kettle black. This then also means we become more dependent on foreign oil--and look who the top producers are. Not a good position to be in. This means the laws of supply and demand kick in as we've seen, gas prices rise, which means the price of EVERYTHING rises because nearly everything has to be trucked in, created with gas, etc. So if we were doing OK or even well and the rest of the society is crumbling, I'd say we are not doing OK.

This is not to say that oil stocks are the perfect stock, just an example everyone CAN relate to. Even a lot of energy stocks are taking a beating because there is too much panic and speculation in the market. Ultimately it will balance out, but this is a rough patch.

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