Investors often make the mistake of reading various financial news – or watching CNBC – and then trying to make changes to their investment strategy to take into account what they’ve just read or seen.
The story making all the news recently is Britain’s exit (ie, “Brexit”) from the European Union. Perhaps it’s old news if you’ve stumbled across this post well after it was published. My guess is something else has taken Brexit’s place as the sign of the coming financial apocalypse.
Surely these “financial journalists” know more than we do, right? After all, it’s their job to research and write about the latest market happenings. We’re too busy leading our own lives to spend as much time as they do on such subjects. Surely they can provide us with the “inside scoop”, can’t they?
Here’s the problem: They don’t know any more than we do!
I’ve posted on this topic before, but it bears repeating when the talking heads get worked up over the alleged upcoming collapse of the financial markets.
Here are some things to remember when you hear or read commentary by one of those “financial experts”:
- Financial writers/commentators are NOT necessarily more knowledgeable in general, and they are definitely NOT more knowledgeable of your situation. They don’t know your goals…..your values…..your time frame…..your ability to ride out tough times in the market. How can they offer you appropriate advice if they don’t know these essential facts? It’s for this very reason that the first thing I discuss with my coaching clients isn’t asset allocations, spending plans and insurance needs. Instead, we discuss their goals – their values – their objectives. My goals for them are irrelevant – and so is the blanket advice given in much of the personal financial press.
- Their job isn’t to get you a better return – their job is to sell ads. I don’t fault them for that fact, but it benefits us to remember what motivates them. Whether it’s to watch a commercial on TV or to get you to click an ad on a website, their job is to write provocative stories that will draw people’s attention. Boring stories won’t do it, so instead, they talk about “7 stocks to buy now”, or “Signs of the coming bear market.”
- Like us all, they have personal biases, too. Maybe it’s because they’ve had personal success with a particular product. Maybe it’s because they have a relationship with a product provider that makes it in the writer’s best interest for them to recommend this product.
- Stories like these play on our fears. Whether it’s the fear of missing out on a hot tip or the fear of losing what we have, it’s easy to feel compelled to do something when we read their advice. Fear is a very strong emotion – and investing success comes from a thought-out plan, not just reacting emotionally.
- Finally, I’ve often seen conflicting advice at the same time – on the same website! Headline 1 says, “Sell! Sell! Sell!” Headline 2 says, “Buy! Buy! Buy!” If these financial news “professionals” can’t even agree, how on earth do we know what to do?
Here’s my advice to those influenced by the talking heads: turn it off. Just don’t watch it or read it. Develop your own plan – away from the emotional turmoil these stories often bring to the surface. Read some of the great books available on solid investment strategies that have proven themselves over many years.
Don’t get caught in the trap of fear and uncertainty provoked by financial news. Control what you can in your portfolio… then go live your life!