It doesn’t matter which news channel you have your television set on. Every channel likes to talk about the markets. The economy is always a hot subject that people love to talk about. In discussions of the economy, the stock market is always front and center. Pundits across the political spectrum have countless opinions about what you should do in regards to investing your money. The question is, who should you listen to? Or, should you listen to any of them at all?
Of course, if you’ve been following for me long enough, you already know what I’m going to say about this–that you shouldn’t trust the financial media. But, let me tell you why. First, you should distrust the advice of the financial media for the same reason that you should distrust the advice of the media on any other subject. Most of the major news sources are funded by advertisers, so they have a vested interest in painting those advertisers in a positive light. While most news programs may not be intentionally biased, the incentives produced in them by their sponsors will inevitably drive them in that direction.
Even if any given news station isn’t biased toward a specific advertiser, though, the fact that it is supported by advertising as a business model introduces bias in and of itself. Programs get advertising revenue based on their ratings. And the ratings are based on viewers. If people aren’t watching the news, then, the media outlets aren’t getting paid. This model introduces that push toward sensationalism in the news. When the bills are paid based on whether or not people are watching, entertainment inevitably takes the place of objectivity. So, by all means, watch the news if you want to be entertained. But, if you want to make good decisions, it might be best to avoid it.
Getting specifically into the financial media, though, there’s another reason why you may not want to take the advice of financial pundits. The entire investing industry is built around activity. If you aren’t buying and selling, then your broker isn’t making money. The financial media is pushed heavily by the interests of these brokers. They want people to be trading stocks–not just learning about them. When you watch the news, then, you aren’t just getting an objective layout of what the stock market is doing; you’re getting pressure to buy or sell certain stocks from certain industries at certain times. If there is bias in the general media toward sensationalism, there is also bias in the financial media toward activity.
Now, I’m not telling you to boycott the news; I’m just suggesting that you take everything with a grain of salt. Be a judicious viewer, and separate the wheat from the chaff–separate the facts from the opinions. I think it is a fantastic idea to keep up on the markets and watch how things are moving. Just be careful about taking the advice that comes along with that coverage. If you need any help understanding how much trading activity is right for your portfolio, feel free to reach out to us for a free consultation. We want to help you use your money toward your own best interest–not someone else’s.