Three Things to Remember with the FOMC Meeting Today

The Federal Open Market Committee (FOMC) meeting today (Wednesday) was underwhelming as usual.

We're still no closer to finding out when the U.S. Federal Reserve will raise interest rates.

That's why smart investors know not to base their investment decisions on what the Fed says or does on any given day. And today's FOMC meeting is no exception.

In fact, listening to the Fed can cause investors to miss out on gains...

For example, in July Fed Chairwoman Yellen said biotech was overvalued. Anyone who listened missed out on the 16.3% gain in the iShares Nasdaq Biotechnology Index ETF (Nasdaq: IBB) and 32.5% gain in the ProShares Ultra Nasdaq Biotechnology ETF (Nasdaq: BIB) since her comment.

That's just one example of when Yellen's guidance steered investors wrong.

Instead of taking Yellen's word on what's best for your money, here's what to really consider after today's FOMC meeting ...

Post-FOMC Meeting Investing Tips

1. Don't panic on interest rate hikes.

The Fed's three rounds of quantitative easing helped fuel a red-hot bull market.

For almost five years, the Fed pumped trillions of dollars into the economy through its asset purchases. Now the Dow Jones Industrial Average, at its 2014 peak, has climbed as much as 170% since its 2009 lows, and the S&P 500 is up more than 200%.

One of the big goals of QE was to force investors out of low-risk, low-yielding assets and into equities. In turn, the plan was to fuel a boom and create a wealth effect that gets consumers spending again.

That's why the investment community dreads the end of easy money.

It's still unclear when that will be after today's FOMC meeting, but many seem to take as given that stock markets will plunge as rates rise.

That's not exactly the reality.

"There is a lot of lip service being paid to the upcoming stock market crash that we're supposed to expect once the Federal Reserve starts raising rates," said Money Morning Small-Cap Specialist Sid Riggs. "The only problem, though, is that historical facts just don't support the fear."
FOMC Meeting Today
The chart to the right shows what has historically happened to the S&P 500 after the Fed raised rates since 1971. Six out of the last seven times this has happened, the markets gained. And this was an average of 13.5%.

Money Morning Members - keep reading for the next two post-FOMC Meeting tips ...

2. Look at what international central bankers are doing.

The Fed ended QE3 after October's FOMC meeting. And rates are expected to increase some time in 2015.

But as the U.S. unwinds from its easy money policy, central bankers in Europe and Japan are doing the opposite. And their moves will create some of 2015's biggest currency profit opportunities.

While the European Central Bank has yet to announce its own version of a sovereign bond-buying program, or European QE, the threat of deflation has ECB president Mario Draghi against the wall. And he's only grown more receptive to the idea as the calls for stimulus get louder across the continent.

The euro is somewhat oversold right now - and this happened before there was even an announcement of QE. It's due for a bounce, one that Money Morning Global Resource Specialist Peter Krauth said could jump between $1.32 and $1.35. The euro is currently around $1.24.

For the Eurozone, it's best to wait before making any investment decisions, at least until Draghi comes clean on his plans for QE.

But Japan is a different story.

Prime Minister Shinzo Abe clearly wants to see his currency plunge. He wants to drive export-driven growth. And his country has been battling deflation for two decades. That's why he's been employing so-called "quantitative and qualitative easing," or QQE. And he's been more than willing to accelerate it as bad economic news continues to land on his desk.

Money Morning Chief Investment Strategist Keith Fitz-Gerald said it could take only two years before the yen is trading at a rate of 200 USD/JPY.

That's why even with its slight bounce - it jumped to 120 before falling back to 117 - you can still book 70% gains on a yen short.

And the best way to do that is to buy shares in the ProShares UltraShort Yen ETF (NYSE Arca: YCS), an ETF whose share price rises whenever the yen falls against the U.S. dollar.

3. Stay focused on "need-to-have" investments, rather than "nice-to-haves."

The most important investment decision you can make is Fed-proof.

That is to invest your money in companies with solid management, fortress-like balance sheets, and consistent dividend histories that deliver goods and services to address unstoppable global trends. These are companies that help you build wealth in the long term, and aren't the flashy names with little staying power.

Take, for example, Becton, Dickinson, and Co. (NYSE: BDX), a leader in single-use diagnosis, treatment, and instrument systems.

At a time when the Ebola outbreak was grabbing headlines, investors were looking for companies that promised future Ebola cures. The hype helped push Tekmira Pharmaceuticals Corp. (Nasdaq: TKMR) up 42% in one day, only to have it drop 22% another.

But by buying BDX, as Fitz-Gerald recommended at the time, investors were buying a company that delivers important medical testing, diagnosis, and drug deliverysystems. These services are relevant even when the news isn't seizing on the disease of the day.

By buying TKMR, investors were letting the headlines make their investment decisions for them, as they tried to guess which company was going to come through on the cure to the world's latest deadly disease.

BDX is a "need-to-have." TKMR was a "nice-to-have," before it became a dud, as many "nice-to-have" companies become as the hype subsides.

Bottom Line: Let everyone else parse the Fed's words and try to make predictions on central bank policy following the FOMC meeting today. The Fed's not going to tell you how to invest, or the right way to invest. Stick to what works.

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