There’s an old adage that says, “There’s no such thing as bad publicity.” When it comes to financial news, it seems to hold a similar sentiment. The media is constantly bombarding us with bleak financial information that can easily make us panic.
When it comes to investing and financial planning, however, it’s important to recognize that the media often sensationalizes bad news. Let’s take a closer look at what you really need to know about investing and financial planning that will take you beyond the negative headlines.
Why Bad News Sells
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.
What the Media Doesn’t Tell You
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 a Long-Term Strategy
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 a little more than 10%. 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.
Diversification Is Key
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 Can Help You Reach Your Goals
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.
You Can’t Time the Market
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.
How We Can Help
Bad news may sell, but it doesn’t control your finances. You do. At Favor Wealth, our commitment is to deliver the highest value for clients both in investment management and client service.
If you’re ready to take control, contact us at 626-529-0445 or email Ricky directly at info@favorwealth.com.
About Ricky
Ricky Biel is founder, wealth manager and Chartered Retirement Planning Counselor℠ professional at Favor Wealth, an independent financial advisory firm serving individuals and families near Pasadena, California. Ricky Biel founded Favor Wealth with a desire to provide unbiased, client-centered, community-based financial advice. Ricky and his team of caring, smart professionals want their clients to feel like they’ve done them a favor, making it easier than ever to accomplish their financial goals by blending proven investment methodologies with creative financial technologies. He is on a mission to help his family of clients feel both a sense of relief and excitement about their future. Favor Wealth takes care of their clients’ needs first and foremost and goes the extra mile to make their clients’ finances grow. To meet and see how the Favor Wealth team may be able to help, contact them today at 626-529-0445 or email Ricky directly at info@favorwealth.com.
The commentary on this blog/website reflects the personal opinions, viewpoints and analyses of the Favor Wealth Advisors’ employees providing such comments, and should not be regarded as a description of advisory services provided by Favor Wealth Advisors or performance returns of any Favor Wealth Advisors’ Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Favor Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.