Don’t Get Distracted by Financial Headlines – Stick to Your Financial PlanJan 30, 2020
by Jonathan G. Cameron, CFP®
We’ve all seen the financial headlines:
“Sell everything and buy gold!”
“Time to take profits off the table!”
“The market is poised for a big upswing – get in now!”
“Make 16% guaranteed with tax lien certificates!”
“Buy my real estate flipping system and control your own rental empire!”
…I’m getting an Excedrin headache.
The Trap of Financial Headlines
If you’re like many people, reading the financial headlines every day can make you crazy. Yet you continue to watch in order to stay informed. You want to be in the know about financial markets so you follow CNBC, Money Magazine, The Wall Street Journal, The New York Times, and others. Some outlets are better than others. There is so much economic uncertainty in the air, so you invest time and energy reading, or listening, to these “experts” to get a sense of what you need to do with your money.
We believe the best investor is an educated investor. If you want to become more knowledgeable about financial markets, you need to be skeptical about the majority of what the talking heads are saying on TV and mind the source. Filter through the financial headlines and keep the following in mind:
News organizations are in the business of making money, just like anyone else.
Sensationalism, disguised as news, sells. Keep in mind who the bosses of these TV hosts and writers are. It’s not you. Economic trends are digested and interpreted in a way that get viewers and readers to sit up and pay attention.
Financial headlines and opinions differ wildly.
You know this to be true. On Tuesday, TV personality Jim Cramer exhorts CNBC viewers to sell out of stocks within a particular industry. The next morning you read an opposing opinion in the Miami Herald that companies in that same industry have great “upside” potential. The perspectives you hear are often contradictory. There is a lot of garbage out there, and people make costly financial decisions by succumbing to their fears.
The financial headlines may be accurate in their reporting but have little bearing on your personal financial plan.
This is perhaps the most crucial point. Today, there are more perspectives than ever. With the rise of social media, the potential audience for these “experts” can grow exponentially. These are usually distractions that may tempt you to alter what you know to be a fundamentally sound course for you and your family. Therefore, remember to focus on long term goals and ignore short term noise. Most financial headlines count as noise, so stick to your financial plan and stay grounded.
If it’s in the news, it’s already priced into the market.
Computer trading algorithms buy and sell securities in fractions of a second, so do you think trading on the news will get you a better result? Also, people who make a living trading in a certain industry – mutual fund managers, as an example – have their ears to the ground and know what’s going on long before you do. They’ve already traded on that information, so don’t stress about factors you can’t control.
The Right Questions are Better than the Right Answers.
We appreciate a knowledgeable investor client. Our most knowledgeable clients ask a lot of questions – not just to us, but to their attorneys and accountants as well. It is impossible to know everything about financial markets, and it’s as much art as it is science to interpret what current economic trends mean. Thankfully, all you need to know is your own bottom line. That is, “What does this mean for me?” That’s where your trusted advisers come in, so be sure to lean on them. Leverage their knowledge so that you’ll know what questions to ask and learn what is most important. Don’t get distracted by sensational financial headlines. Finally, keep a cool head and stick with your financial plan.
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