Separating Facts Versus Fiction in Investing
“An investment in knowledge pays the best interest.” – Benjamin Franklin
In almost every aspect of life, the more informed and knowledgeable you are, the better you’re enabled to make smart decisions. So it seems natural that watching financial news like a hawk would help you become a more successful investor. However, investing is one case where the media promotes the opposite of informed decisions.
The news is filled with market experts who talk about stock market performance, and why all of the signs indicate future success or failure. In fact, sometimes they’ll roll up their sleeves and yell at you about it.
While eye-catching headlines about the next financial doomsday or a surefire investment pick might win ratings and audience numbers, it’s not a smart way to approach investing. Being an armchair expert is one thing, but accurately predicting the future is entirely different matter.
When we look at the facts instead of the headlines, we can see that the average investor underperforms relative to the stock market. In fact, over the last three decades, investors have underperformed the S&P 500 (a major benchmark for US stocks) by a wide margin.
Quite simply, there is no way to predict an investment’s future performance with certainty, regardless of your media presence. Following media predictions to buy or sell stocks might seem appealing, but investors would be far better served by sticking to their long-term investing goals.
The one certainty we can see amidst all this media hype is a long-term investment plan.
At LexION Alpha, our data-driven approach is based on the science and math of the capital markets. We know that so-called crystal balls are always cloudy. The financial media is very fond of making predictions about the future, but investors must remember that any forecast tells you more about the forecaster than it does about the markets.