Shut Out The Noise

Investors need to look behind the half-truths and misinformation to ensure they make the right decisions

- Mark Story

As well intended as media coverage might be, it’s often highly ambiguous, overly superficial or simply wrong, and the consequences of investing on the strength of this information can be extremely damaging.

Thanks to the last US presidential election, the world is less likely to take news reports at face value. That’s great, but when the media collectively sell hyperbole for the sake of a headline, it’s easy for half-truths to gather global momentum.

Once it hits a social media website, news can gather a stickiness that’s hard to shake off. As a case in point, crowd support for bitcoin – based on media reports that it would eventually hit $1 million – gave investors the false comfort it was the right thing to get into.

More deliberate examples of media hyperbole include Business Week’s infamous The Death of Equities issue of August 13, 1979. While the cover story tried to argue that inflation was destroying equities, only a few years later the share market embarked on one of the biggest rallies in history.

Anxiety and greed have always been investors’ worst enemies, and this often results in them buying when they should be selling and vice versa. Much of this is due to knee-jerk reactions driven by either FOMO (fear of missing out) or FONGO (fear of not getting out), both of which are enemies of the successful investor.

Investor paralysis

Investors who use the media’s thoughts as their primary guide risk making big mistakes. For example, there’s the commonly held perception that the yield on 10-year US Treasuries will hit 4% later this year and when it does a massive equities sell-off will lead to a major share market correction.