What should the average investor pay attention to?

"If the Dow and the overall market fall 5 to 10%, and you feel compelled to sell, don't invest in the stock market. These drops are normal. They happen every 12 to 15 months and you need to have the stomach to ride them out.

If you worry about what the market will do in the next 6 to 12 months, you are not investing. You are gambling. Some of my best stocks paid off handsomely in three years, some in five. In every case, earnings made the difference.

So focus on earnings more than fluctuations. Corporate earnings drive the stock market. Yes, other influences impact stock prices, especially over a short period: the influx of money, even tragic or shocking events, can have an effect, but ultimately earnings decide.

As for predicting the future, I've always said that I don't know which way the next 1,000 or 2,000 points in the Dow may go, but I know something about corporate profits.

If they match the historic pattern of the last 50 years, corporate profits double every 10, quadruple every 20, and go up 8-fold in 30 years (based on 7% per year growth). This has been the history of the per-share earnings of the S&P 500.^®

That's why I believe that the Dow's next 10,000 or 20,000 or 30,000 will be up." said Peter Lynch, Fidelity.

The market appears to adjust (bad and good news) so quickly to information about individual stocks and the economy as a whole that no technique of selecting a portfolio — neither technical nor fundamental analysis — can consistently outperform a strategy of simply buying and holding a diversified group of securities.