Don’t Fall for the Hype

You’ve seen the ads for those “financial entertainment” programs. Some channels are populated by little else. There’s a whole financial entertainment industry built around “experts” screaming advice through television screens. Poised just above streams of numbers whizzing by on the screen, they bark bits of information and opinions at us. They lead us to believe we should watch the Dow like hawks, strike when the market seems hot, and pull out at any sign of trouble.

The volume is always cranked up on these shows. If you listened for just a minute, you’d think you were either in the middle of a rally or a panic.

These shows seem to have four modes (or moods):

1. Euphoria (“The recession is over!” or “… All Time High!”
2. Rally (“Don’t miss out! This [sector, stock, commodity, etc.]
is about to skyrocket!”
3. Dour (“Bears are about to roar!”), or
4. Panic (“Sell! Sell! Sell!”).

Don’t fall for the hype! It’s impossible to get the whole picture of the market from a single sound bite. There’s too much information out there, and latching onto a single piece of advice is like trying to sip water from a fire hose. In fact, the loudest voice is often contradicted by another “expert” on the same channel.

Second, even if the points you hear are valid, they’ve almost certainly been factored into market prices by the time you hear them on TV. Remember, ratings are those programs’ primary concern—not your nest egg.

Financial entertainers lead us to believe they’re talking about investing. Not so. In reality, they’re talking about speculating or trading, which is very different than investing.

The truth is that we can use our knowledge or our gut instinct to make guesses, but that’s just a starting point. It’s never a guarantee, and it’s almost always the first step in a bad decision-making process that results in buying high and selling low.

The only way to make money – in a good market or a bad one – is by adopting rational behavior and not reacting to what you hear. Successful investing is about behavior, not skill. Don’t mistake entertainment for education.

No matter what you see on TV, speculation is not investing. If you’re going to listen to financial media, you must develop a mental filter that separates speculation from wise investing. Ask yourself whether the investment fits into your overall plan. If you are committed to a plan that is properly tailored to your needs, stick with it! If the investment will take you off track, it’s probably a mistake.