Back to School: An Evaluative Lesson in Avoiding the Media

As students return back to school, it is a good time to review one of the most important lessons for investors – ignoring the media.

The financial media is the #1 enemy to investors, cloaking itself in an attractive bright light that draws investors in. While they report news, the tactics they use are meant to elicit emotions and often result in distracting investors and tempting them to abandon their financial plan. It is hard to ignore the media. They are available 24/7. But they are detrimental to an investor’s well-being, so learning to tune them out could be a significant benefit for any investor.

In August alone, they took advantage of some volatility and re-framed the discussion as “Market Turmoil”. They plastered their ads all over as if what happens today threatens our financial life. Perhaps what is so amazing is that these articles and superlative headlines occurred when the markets were within 5% from all-time highs.  I can’t imagine how they might respond when the markets have a more protracted downturn.

This is a great reminder that the financial media does not help us make good decisions. On the contrary, they exist to get us emotions so we will tune in. After all, that is how they stay in business. This is contrary to our financial plan, which exists for the sole purpose of helping us reach our individual goals. So, which is a better resource to rely on?

It is easy to give heed to the media, but it will be to our peril. When we need reassurance, it will not be easy, but it will be in our financial best interest to allow our plan to guide our decisions, not the media.

 

©2019 The Behavioral Finance Network.  Used with permission. 

Securities and investment advisory services offered through NEXT Financial Group, Inc. Member FINRA/SIPC. None of the named entities are affiliates of NEXT Financial Group, Inc. Neither NEXT Financial Group nor its Representatives give tax or legal advice. Reference code: 2019-2410