Each January, financial pundits and prognosticators predict what will transpire in the year to come. And the forecasts are always the same: whatever happened the prior year and whatever made big headlines will surely occur once again.

For 2012, the predictions were straightforward: the market will continue to be volatile as it was throughout 2011, financial stocks would continue to suffer, and market participants would remain as frozen as the Baltics in February. But then a funny thing happened on the way home from the New Year’s Ball. Stocks stabilized (and mostly went up - January being one of the best starts to the year in decades), Bank of America, one of the worst performing stocks last year, lead the Dow higher, and investor confidence returned. The fact is… last year’s heroes are rarely this year’s winners; whatever made headlines previously is quickly replaced by new challenges that grab investor attention.

If you are using history as a basis for making future investment choices, your hard earned dollars may be… well, history. Make your investment decisions based not on whatever was hot or popular last year, but rather on today’s stock fundamentals. The global economy, not to mention market reactions to major political and economic events, tends to be very hard to predict. Folks who dedicate their entire lives to forecasting such matters often get it wrong. Not just a little off, but dead wrong.

Yet, if you create a portfolio of high quality companies trading at reasonable valuations and match your investments with your time horizon, the chances that you get it ‘wrong’ are reduced dramatically. Bottom line: you don’t need to react to yesterday’s headlines, let alone predict tomorrow’s news, in order to profit from owning stocks. In fact, the great Warren Buffett has been quoted as saying he spends less than five minutes per year studying macroeconomic issues. And I am sure he spends even less watching financial shows with the words “Fast” and “Mad” in the title.

Rather, he focuses – as should you – on the fundamentals of businesses, and he zigs when the crowd is zagging to last year’s news.

(The information in this article is strictly for educational and illustrative purposes and is not an attempt to furnish personalized investment advice or services.)