Dave Kennon, Kennon Financial
Recently I have seen more scary headlines concerning the markets than usual. I sometimes literally yell out loud, “How are people even allowed to publish this stuff- let alone why it is showing up at the top of my news-feed?!”
This is not a victimless crime. I can’t tell you how many people let these kinds of headlines force them into making emotionally charged investment decisions.
Emotion + Investment Decisions = Not a Good Idea
It also causes untold worry and stress on the millions of readers who are depending on stocks and bonds to fund their retirement years.
Here’s a couple of the most egregious offenders.
We’ll start with an article from Marketwatch.com titled:
Why This Drives Me Nuts
- Nobody knows when the stock market is going to go up or down. I can’t state this any more clearly: There is zero academic evidence that there has ever been a single person who could consistently predict when the stock market is going up or down.
- Morgan Stanley is a big name in the investment industry. Using their name makes the article even scarier because it sounds like it is coming from a reputable source.
- There are lots and lots of prognosticators out there, but the bottom line is this: a long-term, diversified portfolio of stocks and bonds is a time-tested and powerful tool to grow wealth.
- The article pulled out one negative prognostication from a rather lengthy report by Morgan Stanley. The website is using a “clickbait” strategy whereby they use whatever headline is going to get the most clicks- whether the headline is accurate or not.
The exact quote they are basing the story off of is: “The bottom line for us is that we think the selling has just begun and the correction will be the biggest since the one we experienced in February.” (The markets were down a little in February but came right back up.)
Could stocks go down 10% again? Sure. It is a natural part of the markets. But it has no bearing on your long-term financial security. It is about time IN the market, not TIMING the markets.
Let’s move on to the second article (also from Marketwatch.com):
Why This Drives Me Nuts
- Anytime the word “doom” is in the title of an article, you may want to take it with a grain of salt.
- The “prophet of doom” runs a mutual fund. He gets paid based on how many people buy his mutual fund. The more he can get his name in the news, the more attention he gets, and the more investors he recruits.
- The “prophet of doom” has been predicting a historic crash every year for the past 18 years. He was “right” two times, and now he is “famous” for “predicting” the crashes in 2001 and 2008. Really?!
- If you followed this guys advice you would have put all of your money, in cash, in a hole, in your backyard. If you had $100,000 in 2000, you would have $100,000 in 2018. Do you know how much money you would have if the money had been invested in the S&P 500? $100,000 invested in the year 2000 would be worth $264,000 today. (source)
- The article uses lots of technical looking charts and graphs- all of which have been proven to be completely ineffective at predicting the stock market. But to the uninformed reader, they appear to give a lot of credibility to the idea.
- He is predicting that the Dow will drop 69%. If they Dow dropped 69% it would far worse than the Great Depression! Really?!?!?!
Ok, I better wrap this up before I get too fired up.
Online newspapers sell advertising. The more people that read the article, the more money the newspaper makes. Newspapers will write any headline possible to get your attention. Unfortunately, the media learned long ago that doom and gloom gets a lot more “clicks” than sensible financial news coverage.
Ignore. These. Articles.
Dave Kennon, Kennon Financial
Investments are not FDIC – insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Figures shown are past results and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely.
Regular investing does not ensure a profit or protect against loss. Investors should consider their willingness to keep investing when share prices are declining. Market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Results for the Lipper indexes do not reflect sales charges. There have been periods when the fund has lagged the index.
The illustration included herein does not reflect the effects of taxes in some or all of the investments. The Rolling Periods Report shows the selected security’s total return performance over different periods of a specified length. For example, a report might show all of the three year rolling periods between 1980 and 1995. The report indicates in its sub-heading the length of the periods and the time frame it covers. Information on the initial investment, sales charge, reinvestment of dividends, and reinvestment of capital is displayed above the column headings. These figures reflect historical data and are not indicators of the security’s future performance.
Keep in mind that indices are unmanaged and their results do not reflect sales charges, commissions or expenses. Additionally, they should only be used for general comparisons over meaningful time frames. S&P 500 with Monthly Dividends is an unmanaged market capitalization weighted price index composed of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and Over-The-Counter market. The value of the index varies with the aggregate value of the common equity of each of the 500 companies. The stocks represented by this index involve investment risks which may include the loss of principal invested.