Part 7 of the series: Rethink the Way You Invest.
I love the media! It entertains, informs and keeps people accountable. Freedom of the media is enshrined in most democratic constitutions. The Universal Declaration of Human Rights states it well: “Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference, and impart information and ideas through any media regardless of frontiers”.
This is all good, but it cannot be provided for free. Someone has to pay for it! That’s where you and I come in. If the media can keep our eyes and ears glued to its content, then we will be more likely to see and hear the advertising messages that ultimately pay for the content.
Bad news and shock value sells advertising and, in our hyper-stimulated technological world, the media needs to compete more fiercely than ever. Building wealth in the capital markets is a long-term endeavor that does not frequently capture media attention. For example, even though I try to bring a lot of common sense and logic to this article, this will not cause heads to turn. People are more likely to be drawn to outrageous and shocking messages such as, “Housing Meltdown”, “Dow takes Record Plunge” or “Ten Cheap Stocks to Own Now!”
I shudder at the wealth that was permanently lost when investors, scared by sensationalized headlines, bailed out of their equity investments in early March of 2009 and missed out on the opportunity to at least double their money since then, content to “go broke safely” within the comfort of a “safer” GIC portfolio. I partially blame the talking heads of major network television.
This short-term focus is particularly obvious in articles that dispense investment advice and are framed to appeal to human emotion, especially fear and greed. Investors should view these messages as entertainment, not advice, and resist the temptation to act on them.
Warren Buffett once said, “To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”
With the right advisors and a reasonable amount of due diligence, it is possible to determine a sound intellectual framework and use it to continually test all your financial decisions. Applied consistently, you should be able to weather most any storm that life will throw at you.
The American author and poet, Ella Wheeler Wilcox wrote, “One ship drives east and other drives west by the same winds that blow. It’s the set of the sails and not the gales that determines the way they go.”