INVEST IN GOOD COMPANIES -- NOT 'HOT' MARKETS (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson

Not that long ago, a Dow Jones industrial average of 10,000 seemed scarcely imaginable. Yet, we reached it, and little more than a month later, we zipped through to 11,000. Now, few people would deny the possibility of the Dow reaching 15,000 in the foreseeable future.

All the attention paid to this sizzling stock market generates significant heat, in the form of media coverage. But it doesn't shed much light on the practice of good, solid long-term investing.

Why not? In the first place, the Dow Jones industrial average represents only 30 blue chip U.S. stocks, including household names such as General Motors, AT&T, Coca-Cola and Disney. In the total universe of thousands of stocks, many have not fared nearly as well as those in the Dow over the past few years. Consequently, not all investors have prospered equally during the record-breaking bull market.

And that's why it's not a good idea to "chase" a hot market. Even if the Dow, or any other market index, is showing stellar returns, you could still end up with a stock that will underperform for a long time.

Does that mean you should totally ignore the market when making investment decisions? Not necessarily. If, for example, you are interested in investing in a particular industry, and that industry has done poorly in recent months, then you'd want to know this. Specifically, you'd want to know why this sector has struggled. Is it because of transitory economic issues, such as rising interest rates? Or is it because the industry is actually fading, with products that are losing relevance in today's world.

Obviously, this type of industry-specific knowledge would be indispensable to you. But you can't stop there. To make truly informed investment decisions, you need to thoroughly research the companies you're interested in. Examine each company's fundamentals. Is the company's stock price supported by its earnings? If the company pays dividends, have they increased over the years? Is its management team stable? Are its products competitive? Is it well-positioned to benefit from changing demographic trends?

Once you're convinced that you've found a company with strong fundamentals and solid prospects, you can make a purchase decision with confidence. If you do purchase the stock, ignore the day-to-day price fluctuations -- and keep your focus on the long term. If you've chosen wisely, then your stock will eventually pay off for you.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.