5 Tips to Enjoy Financial News With a Grain of Salt
At Halpern Financial, we often provide quotes to journalists who are writing about personal finance and investing topics. Not only do we enjoy sharing a fee-only fiduciary perspective with the world, but connecting with journalists allows us to keep a finger on the pulse of what our clients and friends will be reading and talking about in the near future. It’s fascinating to get this backstage look—but over and over again, we have noticed a wide gap between what is entertaining to read and what you should actually do as an investor.
Sometimes the results are unintentionally funny. In a one interview with a journalist, Portfolio Manager Kirsty Peev commented on how plenty of fund companies create products to suit the investing trends of the moment. The journalist misheard her—and a quote about “plenty of fun companies” responding to investor fads almost made it into a national publication! Thankfully we caught the error during the journalist’s fact-checking process, but it just highlights how silly some investing strategies can be and still be considered legitimate.
Yet there are so many articles out there about “fun companies”—things like “The Top 10 Stocks to Buy in April,” “7 ETFs for 2017,” etc. But investments that fit under a catchy headline likely have nothing at all to do with your individual needs. Instead, ask yourself the following questions to evaluate whether an article is just for fun or whether it is actionable:
1. What are my financial goals?
Saving for college and/or retirement? Long-term investing? Leaving a legacy? View the article through the lens of your individual situation.
2. Is this sponsored content?
Sponsored content or advertorials look like a regular article, read like a regular article, and hang out with regular articles—but they are written or commissioned by advertisers. This will be disclosed in small print somewhere on the page, so be careful not to overlook that disclosure. The article may still be useful, but be aware that you are being sold something.
3. Who is writing?
Is it a staff journalist who may have a gift for writing and research, but is not a specialist? A freelancer who writes for many publications? A financial advisor with a column? What are the writer’s credentials, and does he or she have any evidence of being an expert? Seeking out this information will help you identify what the writer’s biases may be, and determine his or her credibility. For example, an author who is a hedge fund manager is probably likely to recommend a strategy involving his or her fund rather than low-cost ETFs.
4. How does the writer get paid?
Just as you should know exactly how your financial advisor gets paid, you should think about how writers get paid. Many online publications rely on ads to stay solvent, and advertisers want articles that are popular—which is why we often see articles about “fun companies” or new strategies that sound interesting but may be far too risky or overly expensive. Writers and publishers typically are not maliciously putting out harmful information, but their incentive is to engage readers and cover news, not to manage your overall financial life. Also be aware of whether the writer owns any securities mentioned in the article—this is typically disclosed at the end of the piece.
5. Is the focus short-term or long-term?
If you already have a long-term plan for your portfolio, an article on recent news or short-term trends should not sway you to act. It is good to know about the current investing climate, but it’s essentially white noise if you already have a plan that is intended to weather a variety of economic climates.
Investing is not to be confused with entertainment (despite what you see on just about any financial news show). Of course it is a rollercoaster ride to follow the ups and downs of “fun companies” like Tesla and Amazon, but you should not base your retirement security on things like short-term earnings reports or whether drone deliveries will cause Amazon’s price to skyrocket. You can and should read financial news to educate yourself on the markets—but as always, focus your energy on aspects you can control: saving, keeping investment costs low, having a proper asset allocation for your goals, rebalancing, and tax efficiency. It’s not as fun but it certainly increases your funds!
(photo used under public domain)
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