Media and the Markets
In our conversations with clients, we’ve been known to take aim at the media. That’s because bad things tend to happen to your personal wealth if you read, watch, or listen to too much news—or if you read too much into the news you’re reading. It’s human nature to react to the onslaught of information with fits of fear, excitement, or confusion. This, in turn, can lead to counterproductive, buy high/sell low investing.
Often, the media is partially to blame for this. They know what attracts our attention. They know this is rarely the sober, sensible fare successful investors are best off digesting daily. Many members of the press choose to pander to our junk-news cravings, and prioritize their own profits over a commitment to their craft.
But let’s return to our initial question: Who is “the media”? We’re happy to report, not every member of the financial press is cut from the same, self-serving cloth described above. There are those who could get away with manipulating us, but they choose not to. By understanding the difference, you may find it easier to identify who within the financial press is worth following, and who you would be best advised to “unlike.”
Whether it’s in print, on air, or online, we would suggest there are three broad types of financial news to assimilate into the choices you make as an investor:
- Market Reports: From current stock prices to breaking local, regional, and global events, there’s never a lack of raw, market-impacting information flooding media outlets around the clock and across the world.
- Market Commentary: Accompanying the deluge of data points, there’s also a torrent of commentators, eager to share their own and others’ analyses of the latest news.
- Financial Columnists: Many media outlets also hire personal financial columnists to publish deeper, more thoughtful reflections on topics of interest to investors.
None of these categories is inherently good or bad. For example, a regular flow of publicly available information and analyses creates more transparent market price-setting. In this role, a steady stream of mixed-bag news and views leads to more efficient trading for all. That’s good news for investors of every stripe.
The trouble begins when you assume this same outpouring of information can help you predict future pricing for your own trading activities. Despite all the opinions and play-by-play predictions, nobody actually knows which combinations of news will cause what stocks or markets to rise or fall, at what points in time. This means, nobody can provide you with actionable, trade-worthy insights that will enhance an already well-built portfolio, allocated and balanced according to your personal financial goals. Anyone claiming otherwise is setting you up to betray your own best financial interests.
But what about those personal financial columnists who seek to step above the fray and cover the broader beat? Can they add value to your investment experience?
You’ll find subtypes within this category as well, with some columnists mixing and matching one or more of the following roles within their work:
- Watchdogs: Some financial journalists serve as the media’s traditional “fourth estate,” seeking to hold governments, businesses, and individuals accountable for their deeds.
- Advice Columnists: Some are more like the Ann Landers of the financial beat, responding to readers’ queries about finance and investing.
- Outside Influencers: Still others have primary careers outside of the media, contributing their perspective as real or perceived subject matter experts in their profession.
Again, there is no right or wrong kind of personal financial columnist. A dutiful watchdog can uncover real problems that deserve to be exposed. A self-serving reporter may be more interested in creating tempests in a teapot, hoping to further their own career. Advice columnists can offer objective advice, or they can perpetuate misguided myths. Some outside influencers provide well-informed insights within their specialized fields. Others spew out self-dealing sales pitches in disguise.
In short, among the financial press, you’ll find an ocean of noise, islands of common sense, and rare voices of reason that rise clearly above the din. Our approach is to be aware of current events, but to structure portfolios based on personal financial objectives, needs and risk tolerances. If you would like to learn more about our approach, we would enjoy a conversation.