Financial News and the Impact on the Investor

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8Toretirement
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Financial News and the Impact on the Investor

Post by 8Toretirement »

I have to admit that after some self scrutiny, financial news provokes me to change my position from time to time, which goes against my plan.

It's hard to tune out the noise generated by the 24/7 news machine.

I don't watch or read business news anymore.

Anyone else limiting their news exposure?
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Peculiar_Investor
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Re: Financial News and the Impact on the Investor

Post by Peculiar_Investor »

I'm been reading a Jason Zweig posting this morning and was thinking about posting it, now you've given me the perfect lead-in.

The article is An Interview with Safal Niveshak | Jason Zweig.
Jason Zweig wrote:SN: You’ve defined “News” as “noise; the sound of chaos.” Bombarded with such noise from all sides, how does an investor go about blocking it to be able to make sound investment decisions?

JZ: Whatever can be a matter of policy and procedure must be. You should have a checklist that you must follow before taking any action. The rules should be yours, not mine, but they must be rules, not wishes. A few possibilities:
  • Never buy a stock purely because its price has been going up, nor sell purely because it has been going down.
  • List, in writing, three detailed reasons why you are buying, in terms that – like a scientific hypothesis – can be falsified by subsequent findings.
  • Stipulate a price target, a time by which you expect the stock to reach that level, and an estimated probability that those forecasts are correct.
  • Set up, in advance, automated alerts to remind you when price changes significantly – for example, 25%, 50%, etc. At those thresholds, assess methodically whether the value of the underlying business has changed comparably.
  • Sign a contract with yourself, witnessed by family or friends, binding you to sell only when the value of the business, rather than the price of the stock, decays.
If that sounds like too much work, then owning individual stocks probably isn’t a good match for your temperament. Buy a passive fund instead – but don’t forget to sign a comparable contract with yourself.
I'd classify myself as an information gatherer, I like to read and listen to many times, so I couldn't bring myself to limiting myself to news exposure. But, and that's a big but, it is what you do with the information that matters most. Back to Zweig
SN: What are the most important qualities an investor needs to survive the complexity of the financial markets?

JZ: Self-control. I don’t know what proportion of people who call themselves “investors” are, in fact, just speculators, but I wouldn’t be surprised if it is above 90%.

I find it remarkable that in India, the world’s wellspring of yoga, so many investors give themselves endless stress trying to chase short-term market performance.

Investing is not a 110-meter race. It is a marathon. If you want to finish the race, you shouldn’t try to go faster; you should slow down. And you need to learn how to resist investing in any asset or strategy you don’t understand.
Read, listen, absorb, educate etc. for me is a continuous process, but I totally agree with the self control notion. ghariton reminds us often:
ghariton wrote:Whenever I get the urge, sometimes overpowering, ... , I go and lie down
Wise words indeed.
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deaddog
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Re: Financial News and the Impact on the Investor

Post by deaddog »

The problem with using financial news is that your interpretation of the information may not be the same as the markets. As investors we tend to look at information with a bias and ignore the markets message. Also who ever is releasing the news is doing so for a reason. I always question why someone is encouraging me to buy a particular stock.

I get all the information I need from a price chart. If investors are acting on financial news the price chart will show how they perceive and react to the information they receive. A stock with a good looking price chart is doing well because investors price in the latest available news.
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
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Descartes
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Re: Financial News and the Impact on the Investor

Post by Descartes »

There was a response from William Bernstein (author of The Four Pillars of Investing) that I liked in this recent article from the globe's Report on Business magazine called "Invest Like A Legend":
Our ancestors evolved on the savannahs of Africa. What enables survival there is a focus on short-term risks—the hiss of the snake, the flash of black and yellow stripes that signals a predator. We overreact to such signals, which is good if your planning horizon is a half-second. But it’s not great for the modern world, where your planning horizon may be 50 years or more. We sabotage ourselves all the time by overreacting to passing events.
"A dividend is a dictate of management. A capital gain is a whim of the market."
Sensor83
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Re: Financial News and the Impact on the Investor

Post by Sensor83 »

I think reading/watching financial news at a moderate level is fine. In fact, as an investor, you'll want to read any news reports related to your holdings so that you stay informed. However, I've come to points where when the markets are volatile and financial pundits are giving their opinions, the temptation of following their advice and disrupting my allocation was there. So far, I continue to resist and stay the course.
TomB19
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Re: Financial News and the Impact on the Investor

Post by TomB19 »

As best I can tell, financial news is driven by a million monkeys writing on a million word processors.
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