Today’s media can be confusing and overwhelming. While it plays an important and necessary role in keeping us informed of current social and economic events, it tends to sensationalize bad news. The simple reason? Bad news sells. Some people get caught up in the media frenzy, constantly checking every news outlet, while others choose to ignore the news altogether, not wanting to feel bombarded with so much negative information.
When it comes to investing and financial planning, it’s important to stay informed so you can make educated decisions. However, paying too much or too little attention to the news is not a good strategy. So what should you do? First, it’s important to understand why bad news sells. Then you need to understand what information they aren’t sharing. In this article, we explore why bad news sells and what you need to know about investing and financial planning beyond the 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 10.345%. 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. 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
Flashy headlines may be hard to ignore, but you don’t need to let them cause fear or worry about your financial plan. At Horizon Planning Group, we take a disciplined approach to investing and believe that a solid financial plan is the key to a successful financial future. We are committed to helping our clients navigate the media hype and avoid common investing mistakes.
If you are ready to get started on your journey to financial freedom, we would love to help you along the way. Get started today by scheduling an introductory meeting online or call me directly at (770) 627-4157 or email Garrett@MyHorizonPG.com. I look forward to hearing from you!
Garrett L. Holcombe is president at Horizon Planning Group, a full-service financial planning firm committed to always doing what’s right for their clients. With over a decade of experience, Garrett specializes in serving small business owners, giving them a step-by-step process to help them overcome the challenges they face every day and take advantage of the opportunities available to them. His vast knowledge and dedication to his clients allow him to tailor a plan to his clients’ needs and goals, whether that’s creating a start-up plan, financing and tax strategies, employee benefits, and more—all so that his business owner clients can experience confidence in their financial future. Garrett is known for his passion for education. He takes on the role of a teacher so he can help his clients feel empowered about their decisions and understand their financial situation thoroughly. He wants his clients to know that he’s always there for them, no matter what their questions or concerns are, and is always working behind the scenes to keep your plan moving forward.
Garrett graduated from Kennesaw State University with a bachelor’s degree in political science and is a CERTIFIED FINANCIAL PLANNER™ professional. When he’s not serving his clients, Garrett loves spending time with his wife, Amber, and their two children, Samantha and Matthew. Garrett and Amber were one of the first foster homes with Goshen Homes, a foster care agency of Goshen Valley that specializes in keeping siblings together. They adopted their children through the foster care program. Garrett is heavily involved in his community, serving as an adult leader and the safety and training officer for Sea Scout Ship Southwinds 100, and is president of the Cherokee High School Band of Warriors Booster Club. He is part of the Woodstock Business Cub and an active member of his church. In his downtime, he loves cheering for the Braves and Georgia Bulldogs and is an avid Liverpool Football Club and Atlanta United fan. To learn more about Garrett, connect with him on LinkedIn.
This is for educational and informational purposes only and is not research or a recommendation regarding any security or investment strategy.
The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), IFP Securities LLC, dba Independent Financial Partners (IFP), and its advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal-related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. This report may not be reproduced, distributed, or published by any person for any purpose without IFP’s express prior written consent.
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