May 18, 2021
In the digital age we live in, we’re surrounded by thousands of voices and information sources on finances and investing. While this can be great in providing access to a wide range of financial research, it also poses threats when the information is misleading, biased, unsupported by facts or has a hidden agenda.
This has been especially so in the wake of the pandemic, with volatile markets, the continued rapid growth of cryptocurrency, international uncertainty and other evolving circumstances.
As media competed for attention and clicks, headlines and news articles often fuelled the fear amongst consumers and investors, much of which was unfounded.
Unfortunately, this play on emotions caused many investors to make rash and costly decisions which went against their long-term investment strategy.
So, here’s the questions to ask to separate the fake financial news from the news that will make an impact on your portfolio.
Who is the source?
Is the news article, report or study coming from a reputable financial expert, distinguished researcher or trustworthy platform? Or is it a blog article, Facebook post or YouTube video of a friend or individual with no credentials or evidence to support their statements?
Thanks to social media and the internet, everybody has the opportunity to voice their opinion, regardless of whether it’s based on facts or their individual viewpoint. So, always vet the author and publication yourself.
Furthermore, it can be easy to gravitate towards sources that reflect your own values and don’t challenge your viewpoints. Living in this echo chamber can be dangerous. It’s important to refer to a wide variety of sources to maintain objectivity and understand the bigger picture.
What is the news predicting?
Take every financial prediction with a grain of salt. There are thousands of 'predictions' on what will lead to investment success and failure, such as where to invest, what type of investment to make and when to buy or sell. The trick is to take advice from respected financial experts with a track record of success in investing, and those who have perhaps already been through similar financial events and recessions.
Be especially weary of articles which predict market fluctuations. No matter how much data you have, nobody can foresee a sudden market crash or rise. And remember, short-term predictions certainly shouldn't influence your long-term strategy, because some level of volatility is a normal part of the market and investing process.
How is the information framed?
Language is a powerful tool that can make something rather ordinary suddenly catch your attention, especially when it comes to data points and events in the market. So, consider the context of any 'rare' events or trends that are being reported.
This also goes for news articles that reference statistics and reports. While the report itself may be legitimate, a shocking statistic may only be based on a small sample size, or a bold statement could be coming from a study that's preliminary. It's important to know ALL the details before you react to a figure without context or a conclusion that's been oversimplified by the publication.
Is the information relevant to you?
Whether or not the news is credible, if it isn’t relevant or directly helpful to your situation, it’s still not for you. For example, if you’re a long-term investor, there’s no need to focus on the short-term fluctuations of the market.
The relevancy of financial news also depends on its timeline. A headline may be shocking, but it also might just be trending for a few days before the next big financial story comes along. So ask yourself, is the news reporting on a short-term event or a long term trend? How relevant will this information be in three months, three years or thirty years time?
Have you sought professional financial and investment advice?
Don’t make decisions solely based on the information you read. A wealth expert can help you make educated choices suited to your unique strategy and financial goals.
Talk to the team at Calder Wealth Management. Call us on (08) 8373 3333 to schedule your free initial appointment.
Written by James Herriman at Calder Wealth Management.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.
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