The Whirlwind of Noise That Affects Your Decision MakingThere are few ways to escape the barrage of news stories, tweets, blog posts, breaking headlines, and op-ed pieces concerning the stock market and the economy.
Currently the financial media hinges on every rumor and opinion of who will likely be the next Federal Reserve chairman; how Congress will handle the debt ceiling, and a good sound bite from Europe and the Middle East will always be thrown in for good measure. Some of these things are more important than others; it’s often determined by your investment time frame.
It’s never been easier to get updates with Internet access at nearly every street corner and smartphones that could probably beam down messages while in the middle of the Mojave Desert. There are email newsletters you can sign up for to get the latest stock tips and news stations and websites that will pander to whichever political beliefs you hold dear.
Unfortunately, most of it is just fluff. It doesn’t matter, and yet we are consumed by it.
There are thousands of ways to make an investment decision; some believe you could simply have a monkey throw a dart and be just as well off as having Harvard graduates with PhDs in mathematics and economics pick your investments. There are investors who rely on the movements of the sun and moon in order to know their proper asset allocation. Others prefer a more sound approach, taking into account the fundamentals of various companies as well as the movement and trend of their stock price.
The key to digesting all of these data points without getting a stomachache is carving them up into what’s important and what is not. Who will be the next Fed chairman could have far-reaching implications into not only the depths of your portfolio, but also your house and even your job.
The next head of the Fed will have an extremely important job of navigating the barrage of stimulus their predecessor had injected into the economy that impact both the stock and bond markets as well as home mortgage rates. On the other hand, the color tie President Obama wears during a press conference is unlikely to make it into your investment decision making process.
Investors who are truly successful when it comes to long-term investing are able to effectively separate the wheat from the chaff. In order to formulate an opinion, no matter if it’s investment-related or not, you have to be able to mentally isolate what truly can have an impact from what is just noise.
Many investors have a tough time with this. They see the headlines and they hear the opinions of their friends on the golf course and they are unable to make heads or tails of their financial decisions.
Having a written plan and strategy can go a long way to protect assets in the whirlwinds of the financial media. An investor’s savings and retirement are too precious to be controlled by the clamor of the unimportant.
Joseph “Big Joe” Clark, whose column is published Saturdays, is a certified financial planner. He can be reached at email@example.com or 640-1524.