Investing decisions can be hard with all of the noise out there. As a financial advisor, I’ve seen the damage caused when people aren’t informed about their money. It is NEVER advisable to bury your head in the sand and everyone should strive to learn more.
By asking questions and seeking information, we learn and grow. Knowledge is power. But pay attention to the source and who the information is intended for.
If you can tune out the noise from financial news media and others, you will be on your way to long term investing success. Here are some news topics to ignore.
Quarterly earnings results:
If you are in a diversified investment portfolio (which you should be), one company’s quarterly earnings results will tell you nothing about where your investment portfolio will be in the future. Ignore it.
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Commodity prices:
Most recently, some pundits have asserted that the crash of oil prices will lead to a recession. Others argue it will improve the economy. Will the price of oil impact the economy in some way? Yes. Will it meaningfully affect your ability to save and invest for the long term? Likely not.
Political campaigns:
Electing our leaders is important and it is our duty to be informed and vote. But if your guy or gal or political party doesn’t make it into the big chair, bailing on your investment plans makes little sense.
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International relations:
There will always be war brewing somewhere in the world. Tensions can flare and when they do, many will focus on the worst possible scenario. Understandably, even the prospect of war is a scary thing. But if you alter your investment plan every time there’s a military conflict, your portfolio will be in a constant state of change.
Stock indices like the Dow, S&P 500, and Nasdaq:
I know this might sound strange but unless you can follow the movement of these indices on a daily basis without getting antsy, ignore it. Headlines like, “Dow drops/gains 300 points” and “Major indices down/up for third consecutive week” etc. are meaningless. These headlines will give you a false impression of the true state of things for good and bad. When the stock market hits a stretch of gains, it doesn’t mean all is well. When the stock market hits a rough patch, it doesn’t mean things are going to hell in a bucket.
What do these things all have in common? They are all outside of our control. Letting them affect your long term investing decisions can be a big mistake. Instead of getting worked up over things outside of our control, focus on what you can control.
Investing Decisions And Entertainment Masquerading As News
Today, information is at our finger tips via the internet and old world media is still going strong. The sad reality is when we look for information, we are instead being entertained. If you’re watching a financial news channel to see what might be happening in the markets that day, be honest with yourself. You might learn something new, but you are really just being entertained.
Everything you see and hear is designed to keep you watching or reading, not necessarily to inform you. The reality is that prudent investment advice is far too boring for TV.
To be fair, there is plenty of information and commentary by very intelligent people who are experts in their various fields. This is in no way meant to disparage the work of reporters and others who work everyday to bring information to light. Just be sure to know when you are being informed, when you are being entertained, and whether the information is applicable to your situation.
Keep it simple and stay focused on your risk tolerance, investment objective, and time horizon. Tuning out the noise will foster better investing decisions and lead to long term investing success.
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