The most damaging consequence of the financial crisis wasn’t the temporary 50% decline in stock prices. It was the unrecoverable loss experienced by those investors who sold in panic and have remained in cash for the past six years.
The world is complicated, the future is uncertain, and periods of turmoil are commonplace. There’s nothing you can do about it, so get used to it. When there is nothing but fear in the air and investor confidence is low, a well-constructed portfolio, a prudent investment strategy, and a long-term focus can help you stay the course and continue funding your retirement accounts.
If you want to be a successful investor, let go of events you can’t control and devote your time and energy to things you can control. You cannot control your portfolio’s performance but you can control the risk you are willing to take through proper asset allocation. How much you save and invest each year will have a greater impact on your retirement lifestyle than anything reported in today’s news.
Here some reasons why overconsuming the financial media might do you more harm than good:
- You’ll never gain an optimistic view of the future from the financial media.
- Poring over the financial news doesn’t give you an advantage in the market. Today’s news has already been factored into prices by people much higher up the information chain than little old you.
- The financial media exaggerates the sensational to grab and hold our attention.
- Today’s headlines are unreliable indicators as to where the market is headed and are irrelevant to anyone investing for a retirement several decades in the future.
- It’s easy to mistake information for insight. Information is everywhere; insight is in short supply.
If you suffer from “financial media overconsumption anxiety,” here is my suggested remedy:
- Try to put today’s events into perspective. Perspective comes from studying history, not by watching the news.
- Follow the financial news only on Wednesday and Friday. You won’t miss anything important and you’ll free up three days each week to devote to the more important things in your life. You’ll worry less, have less stress and more time to think creatively not a bad trade off.
Some people are not emotionally able to look past today’s market noise and frightening headlines and maintain a long-term focus. Their fear of the stock market cannot be eliminated by a reasoned, intellectual explanation of the benefits of long-term equity investing. These folks will never be successful investors they are savers.
MarketWatch. Read the full article.