- How can investors avoid recency bias?
- How can you tell the difference between financial news and entertainment masquerading as news?
- People advise investors to focus on what they can control but what are those things?
- How can you find a healthy balance between sticking your head in the sand and staying well informed?
- What about when the bad news from Wall Street is based on bad news from Washington?
- Take the Fear Out of Investing
Trish Regan shares 5 ways to protect your sanity and investments from Wall Street noise.
News is coming at all from all directions, much of it bad. We know that in order to be successful we have to take the emotion out of investing. In the face of all this news, how can we filter it so we have enough to make good decisions but not so much that we lose our sanity? Trish Regan, anchor of The Intelligence Report at The Fox Business Network gives us some advice.
How can investors avoid recency bias?
Recency bias is a fancy way of saying that an investor will base his or her decisions on recent performance. It’s natural to expect that once your investments begin growing they’ll continue to do so and vice versa.
I think this is where understanding the news flow is so critical. Make sure you’re following the policies that are being generated and voted (or not voted) on. And, as much as possible, I encourage everyone to take their emotions out of investing. You never want to be selling low or buying high, but emotions can trigger us to make less informed decisions.
The best investors manage to be highly disciplined while still having a feel for things. Investors need to strategize their goals, know what they’re willing to pay for a company (or how much they’ll accept to part with it) stay laser focused, and still flexible. It’s not easy.
How can you tell the difference between financial news and entertainment masquerading as news?
If you see a bunch of anchors throwing their hands around and jumping up and down on TV carrying on about the Dow when it’s up 0.02 percent — that’s entertainment.
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People advise investors to focus on what they can control but what are those things?
Make sure you understand how much money you need to keep liquid and, make sure you keep that money safe. You need to understand your own tolerance for risk and not exceed it. Above all, you want to be able to sleep at night and a good night’s sleep will require some discipline.
How can you find a healthy balance between sticking your head in the sand and staying well informed?
It’s important to stay up on the news that’s relevant to the economy and the markets while not getting yourself bogged down in all the noise. As an investor right now, it’s important to understand trends and opportunities. There’s a lot of noise out there and you want to make sure you’re hearing and seeing the best analysis on the stories that matter most to the markets.
What about when the bad news from Wall Street is based on bad news from Washington?
That’s the world in which we now live. Wall Street and DC are highly intertwined and that intersection is what I cover on my show. Right now, investors are putting a lot of pressure on Washington to generate some meaningful economic policies and they’re extremely hopeful some of these things, like tax cuts, will get done.
But keep in mind, if investors don’t get the reforms they’re banking on, they’ll run out of patience and we could very well be in for a sell-off. My advice is to follow the developments out of Washington. Very closely. Lawmakers will have a major role in the direction of this market.
Take the Fear Out of Investing
At Listen Money Matters we understand that people sometimes don’t know what to make of all the Wall Street noise and it stops them from investing. But the bigger fear should be what will happen if you don’t invest.
That money you have sitting in a savings account is not safe because it’s losing value due to inflation. The longer you wait to invest, the less time your money has to grow through the alchemy of compounding interest and that is time and money you can’t get back.