By Steve Lowrie, Lowrie Financial
Special to the Financial Independence Hub
This month’s financial “STOP Doing” advice is inspired by the events in Europe, with Greece at Ground Zero. I wish I could tell you how it’s all going to play out or, better yet, promise you a happy ending, sooner than later.
Unfortunately, I can’t do that. Time alone will tell. The understandable craving to maintain control over your personal and financial well-being may leave you scanning the popular media’s headlines, searching for tidbits on how to protect yourself from the unfolding uncertainty. That’s why this is an excellent time to repeat a theme I’ve covered before: STOP feeding on junk media.
The Media Can’t Protect You from Volatile Markets
As I described in an April 2014 post, “Here’s why you should ignore the [popular] financial media … While I could recommend many things, I think the most important point for everyone to remember is that it is a myth that today’s headline news has a direct effect on the financial markets.”
This point can be hard to wrap your head around. It seems counterintuitive, but here’s the scoop: Any good or bad news reported by the media may feed your curiosity about what’s going on in the world, but it’s of no use with respect to investing.
In relatively efficient markets where pricing is driven by nanosecond, computer-aided trading, the markets already have incorporated breaking news into global prices; it’s too late for you to try to capture or flee from the adjustment. Stay invested over the long haul, and odds are in your favour that today’s market risks will translate into tomorrow’s market returns. Personal finance columnist Tim Maurer’s “Does Greece Really Matter?” offers a good overview of how that works.
Remember Your History
It’s already a distant memory, but the headline news wasn’t all that different in July 2012. At that time, I observed that we were being “subjected to the relentless pessimism of the financial media: the debt crisis in Europe, sluggish growth in the US, a looming housing bubble here in Canada. These headlines have everyone spooked.”
Especially with respect to Europe, I could say the same thing today. And I will repeat the same primary message: As an adviser, “my role is not to constantly reposition my clients’ portfolios in response to gloomy headlines … When my clients and I come up with an investment plan, we assume that there will be bumps in the road. That’s why we build robust, diversified portfolios that can hold up in all market conditions. We don’t need to tinker with these portfolios unless their goals change. This disciplined strategy offers the best chance of success.”
Choose Your Financial Fare with Care
Still, sensational news sells. It gets clicked on and consumed by a public that remains ever-hungry for more. In that respect, we can almost forgive the popular press for continuing to serve it up. That’s why a good part of the responsibility remains with you, the investor (and with we advisers, on behalf of our clients), to select a more healthy financial media diet for your consumption.
Just as the grocery store stocks both potato chips and carrots sticks, the financial media offers up plenty of “junk food,” but it also offers far more meaty fare from conscientious columnists who report to the investor community in a more meaningful manner. Here are a few of these columnists that I follow:
Jason Zweig’s Intelligent Investor column in The Wall Street Journal. Zweig has summed up the appropriate role for a financial journalist in a wondrous way: “I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.”
I couldn’t have repeated it better myself.
Steve Lowrie holds the CFA designation and has over 20 years of experience dealing with individual investors. Before creating Lowrie Financial in 2009, he worked at various Bay Street brokerage firms both as an advisor and in management. “I help investors ignore the Wall and Bay Street hype and hysteria, and focus on what’s best for themselves.”