There’s a lot of financial information out there. Some of it is helpful, and some of it is unhelpful.
I’m sure many of you take notice when the Dow Jones falls 1000 points in two days.
And even if you don’t usually follow the stock market on a daily basis, when the stock market is dropping, the financial news media will let you know about it.
Because when the stock market is crashing, financial news becomes front-page news.
The financial media makes money when people watch the news or click on articles, so they are biased towards dramatizing moves in the stock market.
The stock market as a horse race
Cable news likes to turn the financial markets into a sporting event or a horse race. Your investments are your hometown team or your horse in a race. You are competing against your fellow investors, who are all trying to maximize their returns to earn both money and bragging rights. Even if you treat investing as a one-player game and are competing against yourself, you’re still trying to get a high score.
The news media and stock brokers want you to treat the stock market like a game you want to win. And game time happens during trading hours, which is 9:30am-4pm, Monday-Friday. Add in pre-market and after-market hours trading, and you could be watching the U.S. stock market from 7:00-8:00 pm.
And by the time the U.S. after-market trading hours end, Asian markets will then open. If you choose to go to sleep, you’ll wake up the next morning, and European markets will be trading. You could literally watch the stock ticker 24 hours a day if you let the stock market consume you.
Why watch the stock market?
But what exactly do you accomplish by watching the daily gyrations of the stock market?
Certainly, you can’t change the outcome of your stock returns. If you’re an investor who believes in the value of investing in index funds, then there’s really no need to watch the stock market on a daily basis. You might need to look at your account balances once a month at the most, but you could probably look at your account balances once a quarter or even once a year.
Many investors try to trade stocks, with the goal of buying low and selling high. But as easy as it may look on paper or on TV, it is really hard to make money trading. More often, you’re unable to beat the market, and your returns are simply eroded by commissions, fees, and taxes.
Perhaps watching the stock market is a cheap form of entertainment. Just like people enjoy watching a good basketball game or the horse race of politics, many people get a thrill from watching the stock market rise and fall.
But the stress of watching the stock market fall can lead you to make bad investment decisions, such as panic selling after a big market drop. While short-term drops such as the Dow going down 1000 points in two days is pretty easy to shake off, prolonged turbulence in the market, such as a bear market drop of 20%, can be harder to shrug off. Watching the news during a bear market will more likely feed into your fear of losing money than reassure you to stay the course.
Watching the news during a bear market will more likely feed into your fear of losing money than reassure you to stay the course. Click To TweetConclusion
The financial media wants to turn the stock market into a sporting event, drawing you in to watch. Investors should resist this urge and tune out the financial news. Stop watching CNBC and Bloomberg News. Delete the Stocks app on your iPhone. Don’t look at your investment account balances on a daily basis. If you tune out the financial news, you’ll have more time to enjoy more productive pursuits, and possibly a higher account balance as well.
What do you think? How often do you watch the financial news? Do you watch more when the stock market is falling?
I agree!
Keeping up with financial news is a very unsatisfying game. If the market is going up, I feel I should put more of my “rainy day” fund into stocks. If it’s going down, well, I just kick myself and pray.
Luckily, I still work full-time. This reassures me that even if there is a permanent stock market disaster (unlikely), I won’t starve. It would alter my retirement plans, however.
The best case scenario is for me to be really busy at the hospital where I have sick patients to worry about… I forget about the market. By the time I get home, it’s already closed, and I’m too tired to think about it. Since that’s usually the case, I don’t worry too much about daily financial news.
That is the beauty of index fund investing for me. Before I discovered it I owned individual stocks and was more inclined to “try and keep up” by watching media sources that would give me hints on that individual company.
There is so much more pressure when you own individual stocks because there is always a real possibility that you can lose it all regardless of how big a name you think you have (blockbuster, sears, radio shack, etc.). With index funds you know you will never go bankrupt (or if it ever did, money will most likely be the least of your worries at that point).
I also am happy that I have been concentrating on real estate (private syndications mainly) that have smoothed the ride a ton as my portfolio value doesn’t have as dramatic a downswing during bad times.
I don’t pay any attention to the stock market. Since I don’t do anything to time the market, the news is irrelevant. I make my investments based on a plan, not based on the current market value.
I constantly hear people tell me they don’t try to time the market. Then their next sentence is about how they are not buying stock right now because it’s about to fall.
Set up a plan and follow it. Don’t follow the market.
Dr. Cory S. Fawcett
Prescription for Financial Success
There’s no lesson like a hard lesson; my hard lesson was in the crash of 2008. Glued to financial news, listening to Jim Cramer scream “SELL!” while he waved his arms and played red alert sound effects (literally), I made some panicked decisions that resulted in greater losses than if I’d done absolutely nothing. Now, being an “older and wiser girl”, and solidly invested in index funds, the only reason I watch financial news during a market downturn is to look for opportunities to add particular stocks to my “play” portfolio. Stoicism is my resolute approach to investing.
It really was quite remarkable to see Jim Cramer advise investors with short-term investment horizons to sell in 2008. I’m sure he will say that he regrets making those statements.
I suppose I check the financial news daily just to see how the markets are doing and to look for tax loss harvesting opportunities. Other than that, I try not to think about it too much.
Great post. Another reason not to listen to the pundits is that many of them don’t know any more than the rest of us. They are paid to make strong statements because the best advice – buy and hold, stay the course – doesn’t sell.
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