We are counting down the final weeks of our Investment Series! Thank you for tuning in again this week as we talk about staying the course when all the noise around us may seem to be telling us otherwise.
If you are just joining us for the first time, or want to brush up on the prior weeks of material, you can revisit the prior entries in our series by clicking the hyperlinks below:
Next week we will cap it all off, and tie all of these pieces together in an investment plan. But let’s get to this week’s blog focusing on the distractions and impact the media can have on our plan.
Let’s jump in.
The media is something we deal with almost constantly in the digital age we live in. Whether it is from the media giants we have all grown up knowing, or your favorite Uncle (Not Uncle Sam!) sharing his viewpoint on the latest headlines in his social media feed, it can be really difficult to tune out the non-applicable pieces of information we hear.
We’ve probably all seen numerous examples of financial media. Hot stock tips, the doom and gloom of an incoming recession, or the economic “bubble” nobody can see coming.
The list goes on and on with stories featuring Fairy Tales or the Crisis of the Day.
I want to preface this article with my opinion that I do not view all this information as bad. You never know what you may see that sparks an idea, a passion, or something which can lead to an incredible opportunity.
While it wasn’t a piece of media my good friend Justin Castelli saw, he found a sign in New York City last week he wasn’t even looking for. You can read more about his experience here (https://allaboutyourbenjamins.com/bigger-picture/watch-for-the-signs/).
Knowing what to look out for, however, is difficult to do on a consistent basis. We live in an incredibly noisy world.
This blog is not intended nor should be considered financial advice or a financial recommendation. The content in this article is solely based on opinion, and you should always consult with your financial professional prior to making any investment decisions.
Before we get started about how the media and the overwhelming amount of information we take in on a daily basis pertains to our personal finances, I want to share some interesting facts and prior experiences I thought about when writing this article.
- We used to live in a world where we had to trade off one form of communication for the other. I am sure many of you reading this remember dial-up internet. Want to use the internet? No phone for you! We now carry a device that can simultaneously do both in our pocket.
- An important message could take hours, days, or weeks to get from one place or person to another. Again, we now all carry devices that can alert us about an emergency weather situation, or tell our hundreds or thousands of friends on Social Media about an exciting life event at a moment’s notice.
- We had to consume the information that was given to us. If your favorite section of a newspaper or magazine only had one paragraph or no pictures, you were out of luck. (This was a really sad reality for me as a kid when there were no pictures of racecars from our local dirt track in the sports section on Sunday…)
If you don’t like what you see on a website today, you will simply go find another one that has everything you want to see.
We no longer need to buy two different newspapers, magazines, or other forms of media to get the other side of the conversation. Millions of opinions or strategies are just a few clicks away.
Not only do we have opinions to look at, but the media has shifted from being able to simply sell us information, to being put in a situation where they must fight for, and capture our initial attention (those oh so tantalizing titles of links) on a daily basis.
Again, this isn’t a bad thing on its own. But, when we realize our eyeballs are what allows them to sell advertisements, pay their staff, and make a profit, we need to know what we are up against.
Let’s shift gears to the financial world, and how this is important in relation to our personal finances.
We are going to focus on just the media this week, but we will wrap up our Investment Series by tying it all together and how the value of Financial Planning has shifted over time as a result of these changes.
Media still plays a large role in our finances, and much for the positive. It can help us learn about changes that impact our careers, remind us of upcoming deadlines, or give us some tips that can allow us to be more efficient with how we save our money.
Being far from the information used to be a distinct disadvantage to most small investors or savers. As mentioned earlier, we no longer need to be near the source of information to have an advantage. Stories can break and go viral in a matter of minutes, for everyone to see and comment about however they may want to.
What may have taken hours, days, or weeks to reach part of the country or world now happens in just a few blinks of the eye.
With this being the case, media outlets need to keep their audience engaged and give them a reason to stay tuned in.
This takes form in many different ways, from talk shows and podcasts to push notifications on your phone, it is all designed to keep you coming back for more.
Jim Cramer’s Mad Money is one of the most popular finance television shows (thanks Jim for the Mad Media pun opportunity) and has been running on a daily basis for the majority of the past 15 years.
Personally, I find his show rather entertaining (mainly because I like this kind of stuff…), but if you tune in, you will surely hear him admit he was wrong at some point. Jim’s show isn’t about making money through investments, it is about entertaining an audience by trying to make money in the stock market, and thus being able to make the show money.
The show consists primarily of Jim talking about various companies, funds, and investment opportunities, along with why he thinks it is a good or bad investment decision. A few listeners call in each show, and Jim will entertain their questions, apply it to how he feels about the investment and will move on to the next topic.
Of course with this format of a show, the entertainment is increasingly enjoyable the longer you watch and get to see the highs and lows of Jim’s picks.
I have nothing against Jim Cramer or his show, but they do create a large opportunity for investment distraction. Focusing on what is hot or not today, rather than looking at the objective of the money over the course of your life could lead to getting out of alignment with the investment plan you really want to follow.
Last week we talked about how taxes can distract us from keeping our investments in alignment with our plans, Jim is no different!
This is only the tip of the iceberg, however, and my next examples show how what a word or phrase may mean today, could mean something dramatically different tomorrow.
I was absolutely fascinated last March during the market correction when tuning into the financial media.
Words like a plummet, free-fall, tank, plunges, and tumbles could be used one day, only for positive words like jump, surge, or pop to be used the very next day.
If you want to take a look for yourself, you can use this fun tool called the “Wayback Machine”, which takes snapshots of your favorite websites and stores them in an archive.
Go back to March 2020 on CNBC.com if you want to go through a handful and see for yourself. I grabbed some of my favorites (hint… they were all within a week or so of each other) and distinctly remember this happening throughout my workday.
Media outlets will even go so far as to change the page within the day on active days… you could see “plummet” in the morning, and “surge” by noon.
These action words are used to get you engaged, and they can also get you to feel like you missed the boat in your investments. Negative words may cause you to feel uneasy and sell out, while positive ones make you feel like now is the time to jump in.
Unfortunately, this energy we feel is the exact opposite of the good ol’ “buy low, sell high” adage we hear when talking about smart investing.
Here are a few examples of what CNBC.com posted during the correction of March 2020.
See the despair? There is also a lot of really negative language in this piece. “Tumbles” is the word of the day. See how they also key in on “down from last month’s record close”. This can create an even bigger feeling of missing out.
Again, we have looks of disbelief. This image was from the site a few days after the last example. Notice points weren’t used in the top banner this time, rather a percentage. Now rather than being “down from record highs”, there is “worst day since the 1987 market crash”.
Don’t worry, if they had you feeling down yesterday, they are here to cheer you up today! This is the very next day. Again, we don’t have any relative context as to what points translate to a percentage in this image alone.
Now I know they are just reporting the news and this is just my own observation (maybe a little skepticism, too) of how the words and emotions can change drastically in such short periods.
A few things I find interesting in this kind of media attention:
- Surge doesn’t always mean the same amount of points, or percent gain. It could mean 200 points (which… that doesn’t tell us anything!) or 1,000 points. It could mean 1%, or 10% based on whatever they may be feeling that day. It is just there to get your interest, nothing else. There are a lot of buzz words being thrown around to get you to take action or engage.
- To my point above and to quote one of my favorite TV shows of all time, Whose Line Is It Anyway?, stock market reporting “is a show where everything is made up and the points don’t matter”. Nobody can predict the future, and simply reading 200 points doesn’t tell you anything. If the stock market is a total of 20,000, that would be a measly 1% change. If it were instead 2,000, we have a 10% change.
- I am sure there are loads of disclosures throughout these articles or just the phrase “Past performance is not a guarantee or predictor of future results” located in some agreement to read the articles or view the content. They aren’t going to tell you that within the article they are trying to get you to read, though.
It isn’t bad information, the media isn’t the worst thing ever created, but it does provide information that can lure us away from the point of what we are trying to accomplish. They aren’t writing these articles to you, they are writing them for you.
One other key thing to notice with all of these headlines is they are almost always referring to just the stock market, usually the Dow Jones or S&P 500 Indexes.
These trackers are solely tracking the movement of stocks, and likely are not reflective of your investments.
If you want a free review of your investments, you can click the button below to schedule a 30-Minute Initial Consultation and Investment Review.
As we learned earlier in the series, the degree of drop or gain in our portfolio can be influenced by the ratio of stocks versus bonds that we hold. This is reflected in the graphic below.
After understanding where your investments need to be to accomplish your goal, with proper routine maintenance, you should be able to rest easy the next time headlines like this pop up.
With a plan in place, you can use the media to your advantage to be informed, rather than letting it influence your decisions based on the emotions you might feel when reading it.
We will touch a little more on why it is ok to experience down markets when we go more into advanced concepts such as Dollar Cost Averaging, which you can sign up to get straight to your email inbox by filling out the form below.
Next week, we will put all the pieces together and cover some closing thoughts on the role investments play in your financial life.
Until then, keep on playing your own game.
