“Why copper and gold are ready to shine”
“Fed rate hike fears ripple through Canada, world….”
“Futures higher on Greek deal”
“Bill Gross: 6 conditions for a bond crisis”
“Traders don’t want to hear this problem with banks”
“This should concern every oil bull in the world”
“Wealth secrets of the one percent – how the super-rich became uber rich”
AHHHH! How can we keep up? The above are some of the headlines that caught my eye this morning as I scrolled through a few websites. I try to read a bit everyday and try to share pieces that offer sensible financial planning and investment insights. However, it’s hard to shut out the noise. I define noise to mean things that are more likely to confuse or detract from a successful investment experience rather than improve it.
I find the noise articles often fit into one of the following categories:
- Forecasters – accurate economic forecasting is nearly impossible. So forget about the forecasters – they won’t help you.
- Stokers of jealously, fear and greed. Say no to the fear and greed. They are natural instincts that help you survive in the wild, but they won’t help your investment performance and they make you feel bad.
- Connectors of events; eg – “Euro falls because of Greece troubles” – chances are tomorrow you’ll read “Euro rises because of Greece troubles” from the same source. Ex-post connections are likely overly-simplistic and try to find significance in randomness.
The purpose of this constant flow of information is to make you believe that unless you’re in the know, you will somehow be left behind. When it comes from the financial press, it’s there to keep you riveted, eyeballs twitching and consuming advertising. When it comes from the financial services industry in the form of “research” or market commentary, it’s designed to make you act – ie. to do something with your portfolio that somehow generates a trading commission or investment product sale.
I’m not saying that the news is uninteresting or that keeping on top of current affairs isn’t a noble pursuit. I certainly like to stay informed and like to feel I could offer an opinion on something if asked. That’s very different than believing that this is knowledge that can add to your investment performance and overall investment experience. It doesn’t. It is noise designed to hold your attention and compel you to act in ways that are more likely to hurt your investment performance (ie. through excessive transaction costs or buying expensive investment products) than to help it.
What will lead to investment success is:
- Employing a long term buy and hold investment strategy rather than trying to outperform the market via stock picking or market timing,
- Being adequately diversified,
- Sensible asset allocation based on your risk tolerance and having a disciplined rebalancing strategy, and
- Keeping costs low.
Keeping up with news flow doesn’t help with any of these, in fact it can only hurt you by making you chase performance and increasing your costs by making more trades.
Free yourself from the noise. In addition to the positive impact it will have on your investment experience, it will reduce your anxiety, and that will make you feel better. Feeling better is good.