The Potential Dangers of Following Media Hype in Investing
The results of the presidential election not only shocked most political pundits; they also stunned a majority of financial experts.
Just as most political commentators believed a Hillary Clinton victory was certain, most financial commentators forecasted that a Donald Trump win would cause the stock market to crash. Many periodicals said a 10% drop was a near-certainty.
Amidst this hype, it turns out the media did get one thing correct: the stock market did initially crash as a Trump presidency became a reality. The Dow Jones Industrial Average (a major benchmark for the US stock market) plummeted nearly 900 points overnight, only to recover a majority of its losses the next morning.
Those who sold their investments during the initial election panic were sorely disappointed, to say the very least, when they sold at an extreme low, only to see those investments’ values soar shortly after.
Politics aside, there’s an important lesson to learn from the presidential election: a smart investor whose goal is long-term wealth creation tunes out media predictions for stability and growth. Building neat and tidy stories out of predicted changes in the stock market might be a good way to win ratings and audience numbers, but it is not a good way to approach investing.
When seeing headlines regarding the presidency – or any major event – it can be very tempting to respond through reactionary short-term investment decisions. However, wise investors who want to build wealth focus on data and rationality, not media predictions. If you’re investing for the long-term, this is the smart perspective that reminds you to stay the course rather than react irrationally.
At LexION Alpha, we attempt to remove irrational emotions from the equation, and carefully invest your wealth with a science-based investment plan. We take a data-driven and analytical approach that’s firmly grounded in academic research to help you achieve your financial goals. Your investment plan attempts to account for uncertainty and attempts to avoid letting short-term emotional volatility sway your portfolio.