By Jay Shareef and Chris Rhoads
In today’s fast-paced world, the media plays an important role in keeping us informed about current events and economic developments. But with all the different voices out there—from local news to national channels and online resources—it can feel like the media is constantly bombarding us with information.
When it comes to investing and financial planning, however, it’s important to recognize that the media often sensationalizes bad news and can be misleading in its reporting. In this article, we’ll explore why bad news sells and what you need to know about investing and financial planning beyond the headlines.
The media thrives on sensational stories. News outlets know that people are more likely to click on articles and tune into broadcasts that feature dramatic headlines and negative stories. This is known as the “negativity bias,” which occurs when people pay more attention to negative information than positive information. This is a well-documented psychological phenomenon, and as a result, the media tends to focus on bad news—even when the good news may be just as important.
In the context of investing and financial planning, bad news can be particularly damaging. When people hear about stock market crashes, economic downturns, and other negative events, they may become fearful and anxious about investing their money. This can lead them to make impulsive decisions, such as selling their investments at the bottom of a market cycle or avoiding the market altogether.
Despite the constant barrage of bad news, investing and financial planning are still powerful tools for building long-term wealth. Here are a few things to keep in mind that usually don’t make the front-page news.
Investing is not a get-rich-quick scheme; it’s a long-term strategy that requires patience and discipline. The stock market can be volatile in the short term, and it’s not uncommon for there to be periods of losses, slow growth, and even recessions. Over the long term, however, the stock market has historically provided strong returns for investors. For example, the 100-year annual average return of the S&P 500 Index is 10.345%. That’s pretty impressive considering the economic volatility the market has experienced over the last 100 years!
Just remember that panic selling at the whims of bad news from the media is a quick way to miss out on the potential upside that comes from down markets. While there will always be short-term fluctuations, over the long term, investing in the stock market has proven to be a reliable way to build wealth as long as you are investing in a way that makes sense for your unique risk tolerance and time horizon.
One of the best ways to manage risk in your investment portfolio is through diversification. By investing in a mix of stocks, bonds, and other assets, you can spread your risk and potentially minimize losses during market downturns. Keeping your portfolio diversified is another way to avoid “fad” investments or trends that may be overly hyped by the media.
For example, if the media is reporting on a new technology that is poised to revolutionize an industry (or a recent poor performer they think you should sell), investors may rush to either buy or sell that one company. But if the media’s predictions don’t come to pass, investors may suffer significant losses or miss out on significant gains. By diversifying your investments across different sectors and asset classes, you can avoid becoming overly focused on a single trend or fad and reduce the risk in your portfolio.
Financial planning is about more than just investing. It’s about setting clear financial goals and creating a plan to achieve them. An experienced financial planner can help you assess your current financial situation, identify areas for improvement, and create a plan that takes into account your unique circumstances and goals.
Financial planning is a critical tool for working toward your long-term financial goals, and it can provide a helpful road map in the face of the constant onslaught of negative news and hype that the media often focuses on. By creating a comprehensive financial plan, you can establish a guide for achieving your goals—regardless of what’s happening in the news or the markets.
A well-crafted financial plan considers factors such as your income, expenses, savings, investments, and debt, and helps you develop a strategy for pursuing your long-term financial goals and avoid making impulsive investment decisions. Talking about the benefits of financial planning may not generate as many views as talking about the latest financial crisis, but it is a great way to take control of your financial future and make progress toward your goals, even in a “bad news sells” environment.
The media would have you believe that if only you had been more informed, you would have been able to avoid the losses in your portfolio. If only you listened to more commentators, read more magazines, or listened to the latest financial podcast, you would be able to successfully time the market. But what the media won’t tell you is that you can’t time the market because no one can. Buying and selling investments based on short-term market fluctuations is a losing game. No one can consistently predict what the market will do—no matter how much bad news they watch. Even professional investors and fund managers, who have access to extensive research and analysis, struggle to consistently predict the moves of the market.
Instead of trying to time the market, a more effective strategy is to focus on long-term investing and diversification. By investing in a diversified portfolio of assets, you can reduce risk and maximize returns over the long run. And by staying committed to your investment strategy through market ups and downs, you can avoid the temptation to make impulsive decisions based on short-term market fluctuations.
Bad news may sell, but you don’t need to fall victim to its trap. At WealthFlow Financial, we know that disciplined investing and a solid financial plan are the keys to a successful financial future, and we are dedicated to helping our clients navigate the media hype and avoid common investing mistakes.
By taking the long-term approach, we can help you work toward your financial goals and build a bright future for yourself and your family. If you don’t already have an advisor helping you do that, reach out to us at (301) 798-5250 or schedule a phone call now.
Jay Shareef is vice president, financial advisor, federal benefits consultant, and co-founder at WealthFlow Financial. As a U.S. Army veteran, Jay is passionate about helping federal employees create a bulletproof plan for retirement and navigate the often confusing and complicated federal benefits landscape. He spends his days educating and providing clients with unbiased insurance benefits and retirement strategies to help his clients create guaranteed income for life. As a problem-solver and trustworthy resource, Jay always puts his clients and their needs first so they can find financial peace of mind. He holds the Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) credential. To learn more about Jay, connect with him on LinkedIn.
Chris Rhoads is a co-founder and vice president of WealthFlow Financial. As a registered investment advisor and independent financial professional, Chris is committed to helping his clients in retirement and he takes a holistic approach to financial planning that includes insurance and risk management, investments and wealth management, retirement income planning, and estate and tax planning. He holds the Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) certification. Chris has been married to his wife, Tia, since 2009 and they live in Frederick, MD, together with their two young daughters. In his free time, Chris enjoys traveling, watching sports, and being active in causes about which he cares passionately. To learn more about Chris, connect with him on LinkedIn.