Prosper By Ignoring The Financial Press

Pretty much every day when the collateral market techniques – whether it is up, down, or barely whatsoever – the financial media feels compelled to come up with some explanation as to the reasons the market did what it does. Explanations can be direct pretty, such as attributing a proceed to economic data, or they can be (to be polite) rather esoteric, as is often the case when the marketplace moves in the lack of an obvious drivers significantly. It is, of course, important to understand what’s taking place in the global world and the markets. For that reason, we are compelled to make some use of the financial and general media.

After all, they do report the news and internet and television allow us to get the news in real time. The problem is that the individuals within the media are people (and salespeople). As a total result, whatever facts they survey are inevitably colored with the emotions they carry and sometimes add a dash of spin aimed to drum up more audiences (they may be running businesses, in the end).

So rather than relatively dispassionate reporting of facts, we are treated to a deluge of (often conflicting) strong statements, judgements, and some facts tossed in for good measure maybe. Bad news sells especially well, so the financial media often harps on the negative side to get as much attention as is possible.

Unfortunately, we as traders have problems with interference from our feelings even before we start the TV or type in a URL. Pick up any book on behavioral finance (a remarkable topic) and you will quickly find that the mind developed under evolutionary circumstances that did not include investing.

As a result, we are hardwired to fall prey to a few common mistakes again and again. The only remedies seem to be either lifelong awareness and training, or utilizing “mechanical” investing vehicles (such as target date or balanced mutual funds) that take the emotion out of investing. Whenever we start watching the braying of the financial media it becomes a lot more challenging to don’t be ruled by your emotions.

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  • 7 years ago from Ipswich, UK

It is normal to truly have a visceral reaction to emotionally charged text messages. We are communicative herd pets as humans and in the age range past the individual who did not focus on cries of alarm from other associates of his tribe often became the sufferer. As a result many people listen to the financial mass media closely start making emotionally powered decisions with their money, and do themselves a complete great deal of damage. Just how can we as enlightened investors avoid this trap and perhaps even take a bit of advantage of the situation? First, everyone should use some personal control and limit their contact with the financial press.

If there is a particular interview worthy of watching then watch it but don’t leave CNBC or the Bloomberg route on all day long. Second, day at a price unless you are actively aiming to buy or sell something on a particular, don’t constantly check the marketplaces or the costs of your investments. It is improbable that things will move much intraday and by constantly looking at you will get more unnecessary contact with the financial mass media.

In this respect, traditional mutual funds have an edge over ETFs: you only see one price change each day. Third, if you are doing homework into a potential investment or reading the latest press release or SEC filings in one of your existing positions, stick to the facts. Especially regarding deep value plays (which are valued because people hate the company), the financial media will inevitably play to the prevailing negative sentiment regarding a company and often obscure the facts.

Similarly, a market darling will usually have nothing but nice things said about any of it regardless of what actually is happening at the business. With all of this swirling around, it is easy to take a ride on emotions and get swept away from the known facts. Ignore the slant and make your own decisions.