Investing is BORING. Here’s why you shouldn’t let Wall Street advice and the likes impact your portfolio! [Wednesdays: The Independent Investor]
Miles Everson’s Business Builder Daily speaks to the heart of what great marketers, business leaders, and other professionals need to succeed in advertising, communications, managing their investments, career strategy, and more.
A Note from Miles Everson:
There are various factors that affect our investment strategy.
From internal factors (fear, greed, excitement, impatience, etc.) to external factors (news, what other investors say or do, etc.), a lot of what we hear, see, feel, and think impact how we make financial decisions.
In today’s article, we’ll focus on an external factor that can hugely impact our investment portfolios:
Keep reading to know in what ways the mainstream media affects our investments and why we shouldn’t let it rule our financial decision-making.
CEO, MBO Partners
Chairman of the Advisory Board, The I Institute
The Independent Investor
Recent rate hikes…
High inflation numbers…
The unpredictability of future spending…
These are some of the news that are dominating the mainstream financial media nowadays. Turn on the TV, check the financial news on your phone or PC, or read the business or finance section of the newspaper, and you’ll see it sounds like the economy could break at any minute.
Would you easily believe these kinds of information?
We hope not.
According to Professor Joel Litman, Chairman and CEO of Valens Research and Chief Investment Strategist of Altimetry Financial Research, the daily blips of the market make for a bad investment guide.
He says pattern recognition is still paramount to success. It’s best to examine and understand historical market patterns to understand the big picture of the US economy.
… and by understanding past patterns, you’ll have a model for the present stock market condition or the economy in general.
Why the Financial Media is Making It Seem Like the Next Crash is Right Around the Corner
In terms of delivering useful financial guidance, the business models of mainstream financial media are broken. It’s terrible, but you almost can’t blame them―they’re paid for sparking intense emotional reactions.
Don’t get us wrong. We’re not saying the financial media is entirely evil; we’re only saying a sad, ugly truth that many of them exist to sell advertising.
It takes a lot of content to fill those hours of TV and radio programming—even the sections of the newspapers. Most of the time, the media is propagating ideas that are not only wrong, but also harmful to your investment portfolio.
Here’s what Professor Litman said:
“Major networks and most news websites are paid in advertising and, therefore, by viewership. In the world of the 24-hour, non-stop news cycle, saying boring things, no matter how accurate, does not generate views.”
In other words, sensationalism sells. Advertising-driven businesses are paid to make people feel intense emotions.
What about providing accurate, insightful, and cognitive content and context?
Well, that just doesn’t keep people glued to the news all the time.
Take a look at these myths the financial media wants you to believe (but you shouldn’t). Identifying these will help you tune out 95% of the noise that does nothing to help you achieve a financially stable future.
- If you don’t pay attention to the financial markets, your investments will suffer.
One of the things the mainstream financial media wants you to believe is that following the markets on a minute-to-minute basis is of utmost importance.
Think about this: How can they compel you to keep watching the news at all times if they won’t condition your mind to believe that?
That’s one of their tactics to increase their viewership rates… but there’s no truth to that claim. Just because you’re updated with all the news in finance and investing, that doesn’t necessarily mean you’ll succeed.
As Warren Buffett, CEO of Berkshire Hathaway, said:
“I would tell don’t watch the market closely. The money is made by investing and by owning good companies for long periods of time. If [people] buy good companies, and buy them over time, they’re going to do fine. If they’re trying to buy and sell stocks, and worry when they go down a little bit, and think they should maybe sell them when they go up, they’re not going to have very good results.”
- You need to listen to Wall Street advice to be a successful investor.
That’s not exactly true.
Remember: Wall Street is also part of the mainstream financial media, so you shouldn’t rely too much on the information it produces.
Additionally, no one from Wall Street—actually, no one from any other financial media company—knows when the stock market is going up or down. There hasn’t been a single human being in history who’s able to accurately predict the ups and downs of the markets.
It’s just that every once in a while, experts in these media companies get lucky and guess right. However, they can’t do that all the time so the best way forward as an investor is to get your facts straight and do your own research.
- Market experts know why the markets go up and down.
You probably hear this frequently in the news: The market drops and the financial media has all kinds of reasons or rationales.
“Bad unemployment numbers came in”…
“Chinese currency fluctuations are affecting imports”…
“Instability in the Middle East is unnerving investors”…
When you hear or read these details, don’t be quick to listen. The vast majority of the time, no one truly knows why the markets go up or down.
Sure, some experts can hypothesize some reasons as to why the market fluctuated, but at the end of the day, nobody really knows for sure. The key takeaway?
Don’t let the mainstream financial media kill your portfolio!
Professor Litman said that if you want to be a great investor or to be great at any other discipline, you need to have emotional intelligence.
According to him, great investors consistently talk about how “boring” great investing is. They talk about how the market’s daily volatility and news flow simply need to be ignored.
His advice to investors?
“Emotional intelligence combined with the right data on a long-term context like the Market Phase Cycle is far more important in investing. Intellectual horsepower needs a strong emotional foundation.”
Keep this investing insight in mind as you think through your next financial decisions!
Remember: Following the right, “boring” strategy and seeing through the daily emotional market waves is a sure-fire way to wealth creation.
(This article is from The Business Builder Daily, a newsletter by The I Institute in collaboration with MBO Partners.)
About The Dynamic Marketing Communiqué’s
“Wednesdays: The Independent Investor”
To best understand a firm, it makes sense to know its underlying earning power.
In two of the greatest books ever written on investing, the “Intelligent Investor” by Benjamin Graham and “Security Analysis” by David Dodd and Benjamin Graham (yes, Graham authored both of these books), the term “earning power” is mentioned hundreds of times.
Despite that, it’s surprising how earning power is mentioned seldomly in literature on business strategy. If the goal of a business is wealth creation, then the performance metrics must include the earning power concept.
Every Wednesday, we’ll publish investing tips and insights in accordance with the practices of some of the world’s greatest investors.
We make certain that these articles help you identify and separate the best companies from the worst, and develop your investing prowess in the long run.
To help you get on that path towards the greatest value creation in investing.
Hope you’ve found this week’s insights interesting and helpful.
Stay tuned for next Wednesday’s “The Independent Investor!”
Head of Marketing
Valens Dynamic Marketing Capabilities
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