The Media We Follow Affect Our Investment Behavior
Paul Fain, CFP®
Are you investing under the influence? That is, under the influence of the media? Last week, I attended a thought-provoking presentation titled “How Your Media Diet Informs Your Perspective on Markets, Investing, and Wealth,” by Carson McLean, a CERTIFIED FINANCIAL PLANNER™️ professional and regional director with Dimensional Fund Advisors.
Carson used several familiar acronyms to illustrate how the media feed our investment behavior. The first was FUD: fear, uncertainty and doubt. Investing should not be driven by emotions, for example, which can lead to panic selling. “We don’t need fear, and dismay, but we can’t escape uncertainty,” he noted. Long-term investors should be prepared to withstand short-term market volatility. Investors who have immediate spending needs should maintain a healthy reserve of cash and short-term bond funds to ease their minds.
FOMO: fear of missing out. The media, including social media, often feed off greed. Stories circulate about the explosive growth of tech stocks, flipping houses, Bitcoin, gold prices, etc. Or Charlie down the street is hitting it big in cannabis stocks. Carson warns us, however, “Resist the urge to benchmark to your neighbors.” Your personal financial plan is just that – personal. It is based on your unique circumstances, goals and risk/reward profile. The saying “Comparison is the thief of joy” is attributed to Theodore Roosevelt and others. In other words, stay in your lane, control what you can and do your best.
YOLO: you only live once. With this attitude many investors become too aggressive or too conservative. They are all in or all out. With almost a Vegas vibe, some of these investors speculate in big bets with money they can ill afford to lose. Other YOLO investors never venture beyond certificates of deposit and money market accounts. They probably will not keep up with inflation’s erosive effect on their standard of living.
Fear and greed. The media know what captures eyeballs. It is provocative headlines. They know we crave to eliminate uncertainty but are susceptible to greed.
The better path is to be educated about your investments. Have an overarching strategy you will follow with discipline and consistency. Still, be prepared to make adjustments as change happens. Filter the noise. Be patient. Have a trusted sounding board to vet your thoughts before taking action.
This article originally appeared in the Knoxville News Sentinel online on September 22, 2023.