What do you do when the sky is falling (or when everyone on the news says it is)? How do you know what to believe when it comes to the stock market “crashing”? Here is some background on how the news became so sensational along with 4 tips to help you better the bad stock market news when it comes.
Can I Trust the News Anymore?
The news media has evolved significantly since its inception. Many of us remember the days when the evening news was our trusted source for information. There were three major television news outlets and three faces with whom we grew well acquainted. The TV news was a presentation of information, and although it is never entirely possible to eliminate bias, the general sentiment was to deliver the news objectively and factually. Editorials, expressions of personal opinions, were clearly designated as such. Overwhelmingly, people felt as though the news was a place that they could turn to get the facts on an issue.
Today’s news is not so simple. Those three newscasters have multiplied into hundreds, on literally hundreds of channels, all of whom are competing for your viewership. In the pursuit of providing you the viewer with the most compelling newscast, they often present the “news” in a series of expert interviews. The problem here is not that all of the experts are espousing their professional opinions; that is to be expected. Rather, the issue is that the majority of Americans watching the news still believe that it is a place where they can go to get the facts presented to them. They do not realize that the interview that they see this minute will be contradicted with another expert’s opinion in 30 minutes. Don’t get me wrong – these expert opinions are valuable when viewed in context; however, my experience has shown that most often viewers take the information as fact. After all, that is what they grew up doing, and that is what they learned that journalism was when they studied it in school, the presentation of facts. Today’s news is often heavy on sensationalism and hyperbole and light on substance – but, heck, it is a lot more entertaining.
How to Approach Turbulent Investment Tides
So what do you do when the sky seems to be falling and the stock market news is volatile enough to make you lose your appetite for investing altogether? Who and what do you believe? Granted, the following is MY opinion, but I think it provides a general context through which you can approach turbulent times in market activity.
1. Remember why you are investing and what your overall goals are
If you are saving toward retirement and that is ten years away, the day to day fluctuations are unlikely to impact your goal.
2. Don’t believe everything you hear/read/see on the News
Remember that the media is competing for your attention and they will often do anything to get it. Side note: I have seen the word “Armageddon” on the news more times than I would like to admit in the past week. Armageddon – Seriously? It’s almost laughable and probably would be if people weren’t actually believing it.
3. Stay rational. Emotional investing is never a good idea
There is a reason why the average investor does not get anywhere near the same returns as the stock market. He/she often lets emotions rule investment decisions, selling at the bottom and buying in at the top. I encourage you to view market drops as opportunities rather than reasons to sell. Think about it like this: would you sell your house when the housing market was at a low unless you absolutely had to? No. Most likely you would ride it out because ultimately you know the value of your home and want to wait until the market rebounds. You would not want to willingly take a loss.
4. Talk to an expert who knows YOUR situation
The folks on TV know nothing about you. They don’t have to answer to you at the end of the day. They can often give advice without worrying about the consequences because they don’t have the financial situations of their clients at stake. Your personal financial advisor, however, is going to give recommendations with your best interests in mind. At times like this, especially, you want to rely on the expert guidance of your financial advisor to help you through the rough patches in the market.
Don’t try to go it alone. There are sources of information that are helpful and trustworthy. I just encourage you to exert healthy skepticism and remember to maintain a sense of humor if you see the word “Armageddon” running across the television screen.