Investment Advice?
I am finding that the worse way to receive investment information or advice now a days is to tune into the media.
At the end of the day, what is the purpose of every newspaper company, media website and television station? It is to get you to tune in and/or buy something (from them or their advertisers). In order to get us to do that in this multi-media world, every little story is turned into an over-blown event and, when events have a direct impact on our financial lives, they become doubly big events.
For example, the Dow Jones fell 416 points today due to fears of a global slow-down. Its the lead story on Yahoo and I suspect it will be on the front page of the newspaper tomorrow. Most of the big names dropped today on the Dow; talk has started about sell-offs of stocks etc. etc. Analysts have commented on this being the beginning of a correction etc. etc.
But let's step back for a minute- if China slows down (which started the sell-off) does its economic growth go from 9% to 7% (I don't have the stats but the point is it goes from high to pretty high)? That is still a great growth rate. If you continue to be invested in high grade investments, will you continue to make money? I would certainly hope so. Isn't the point of investing to buy low, sell high- isn't this the perfect opportunity to buy quality on the cheap?
But if you take the media at face value and do not dig deeper, you would think that this was 1929 all over again.
The point being taking the media's reporting on money as gospel is seriously harmful to your net worth. Statistics show that people do poorly with their own investments not because of the instruments they invest in (yes, mutual fund can be bad) but because they keep chasing yesterday's winners and cash in and out of investments.
Why do people chase yesterday's winners? They see on the news that they should invest in Savings and Loans (80's), buy tech (90's), buy income trusts and oil (00's) because the media makes it sexy and we all want to be sexy investors right?
Be boring. It will make you financially secure.
Read everything with a grain of salt. At the end of the day, dig beyond the media reports and go to the source- the financial statements, the real estate assessment, the fine print etc. etc. They reveal a lot more than a 500 word article/cloumn could ever do and raw numbers don't tug at your emotions like the media does.
At the end of the day, what is the purpose of every newspaper company, media website and television station? It is to get you to tune in and/or buy something (from them or their advertisers). In order to get us to do that in this multi-media world, every little story is turned into an over-blown event and, when events have a direct impact on our financial lives, they become doubly big events.
For example, the Dow Jones fell 416 points today due to fears of a global slow-down. Its the lead story on Yahoo and I suspect it will be on the front page of the newspaper tomorrow. Most of the big names dropped today on the Dow; talk has started about sell-offs of stocks etc. etc. Analysts have commented on this being the beginning of a correction etc. etc.
But let's step back for a minute- if China slows down (which started the sell-off) does its economic growth go from 9% to 7% (I don't have the stats but the point is it goes from high to pretty high)? That is still a great growth rate. If you continue to be invested in high grade investments, will you continue to make money? I would certainly hope so. Isn't the point of investing to buy low, sell high- isn't this the perfect opportunity to buy quality on the cheap?
But if you take the media at face value and do not dig deeper, you would think that this was 1929 all over again.
The point being taking the media's reporting on money as gospel is seriously harmful to your net worth. Statistics show that people do poorly with their own investments not because of the instruments they invest in (yes, mutual fund can be bad) but because they keep chasing yesterday's winners and cash in and out of investments.
Why do people chase yesterday's winners? They see on the news that they should invest in Savings and Loans (80's), buy tech (90's), buy income trusts and oil (00's) because the media makes it sexy and we all want to be sexy investors right?
Be boring. It will make you financially secure.
Read everything with a grain of salt. At the end of the day, dig beyond the media reports and go to the source- the financial statements, the real estate assessment, the fine print etc. etc. They reveal a lot more than a 500 word article/cloumn could ever do and raw numbers don't tug at your emotions like the media does.
Labels: financial advice
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