Much of the financial media operates with incentives which are not in the best interests of investors. The financial media - both print and broadcast - have an agenda, like any business, to increase their revenue. They do so by running stories that will maximize their audience and, accordingly, their advertising revenues.
What types of stories do that? All too often it is some version of:
- "Panic Takes Over as Market Plunges"
- "Are We Entering The Next Great Depression"
- "Bear Market - No End In Sight"
- "Five Mutual Funds for the Coming Year"
- "The Next Microsoft"
Headlines designed to motivate you to buy the publication or keep watching the show.
There is a term for this type of sensational journalism that we find in the financial media: investment pornography.
Don’t get caught up in it. Remember, sensation sells.
Below are three tips to keep you calm when the media gets you riled up.
1. Think Long Term
When you’re caught up in the news of the day, it’s easy to forget that all markets cycle. Remember “The New Economy”? Experts said the boom would go on and on. Well, it didn’t. And neither will the current economic crisis.
2. Study History
To keep things in perspective, read the following two books:
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
A Random Walk Down Wall Street by Burton Malkiel
3. Find Knowledgeable Advisors
Even the best athletes in the world have coaches; someone who provides advice, guidance, and keeps you focused on the things that matter. A qualified financial advisor will keep you focused when the economy appears to be off kilter.
