Financial news has evolved from a weekly PBS show or looking up stock prices in a newspaper the day after market close, to today’s 5-day/week 18 hour+/day live “news” program. Today, financial news is instantly available at our fingertips. There’s all manner of loud, colorful prognosticators, live-action shots from conferences & trading floors, and a new opinion or rumor every hour.
While it can be interesting at times to tune in, keep in mind that the ultimate goal of financial news channels is ratings. Ratings themselves are not a result of sound investment advice but rather of audience entertainment.
Unfortunately, the goal of audience entertainment means the consumer ends up with a fair amount of financial noise. There are a myriad of financial news outlets coming at you over the airwaves, online, by mail. Most suggest they are independent and generally they are. But, there is a symbiotic relationship that they have with their clientele which one should keep in mind. The bulk of their advertising clientele are financial firms. Many of these financial firms revenues rely on 1) trading volume 2) asset servicing fees 3) asset management fees.
So would these financial firms be best served by having the business & financial news outlets provide A) consistent investment information that downplayed the everyday noise which can be distracting or B) provocative, frenetic, bombastic, and sometimes intimidating coverage of “the markets” and “the news?” This is not to take away from the jobs that the financial news services do, but rather to point out that their incentives might not line up with yours as an investor.
A good deal of the advice you’ll hear on the financial news & media outlets involves how to invest like someone else. It’s not a discussion of their investing process, but rather what investments they own. But, is it what they own or understanding their process & focus which might be most beneficial to you? For instance, if you ever had a mentor in business did you try to buy the same car that they did? Move to the same neighborhood? Etc?
Ultimately, it’s your choice if financial news informs you or distracts you on your path to building wealth.
No matter how complicated & noisy it all gets, remember one concept. For all financial instruments at any moment, they simply reflect the Net Present Value (NPV) of expected future cash flows.