Dave Kennon, Kennon Financial
Navigating financial articles can be challenging. Today, I am going to help translate financially related headlines so that you can be better armed against Fake Financial News.
First I’ll show you a headline, and then I will give you candid remarks from the author (at least what I imagine they might be).
Candid Remarks from Author: We have absolutely no idea why the stock market is up 1% today. We guess the government shutdown might have something to do with it. But, seriously, we really have no idea.
Candid Remarks from Author: I hope this headline caught your attention and you clicked on it. Now listen to me speculate of how one small pharmaceutical stock is ready to skyrocket. Of course, if my stock picking were consistently correct then why would I be writing articles for a financial news site? I’d be one of the richest men in the country.
Candid Remarks from Author: I’m assuming everyone already realizes we are trying to sell your gold. We think it is a great investment opportunity. We believe gold is undervalued, and you could make a fortune. It’s strange how we want to sell OUR gold when we believe it’s so valuable, isn’t it?
Do we charge you a significant markup? Yes. Will you find it difficult to sell your gold at the same value? Yes. Does gold have stable and consistent historic returns? No. But….if you act now we will give you a free safe!
Headline: Latest Warning Sign for Markets: A Possible ‘Earnings Recession’ (New York Times)
Candid Remarks from Author: I am going to show you a bunch of economic data. Analysts expect earnings to rise by just 1.2%…. Wall St. analysts are slashing forecasts…. The financial community expects an earnings recession….
Granted, we don’t really know what the stock market is going to do. If these analysts could accurately predict stock market changes, they would be the richest people on earth. They would live on a private island. People from around the world would fly to their island, bow at their feet, and beg them to handle their portfolio.
Candid Remarks from Author: Is it smart to invest in something “red hot?” Probably not. Can investing in Brazilian stocks and Mexican bonds be profitable? Sure. Is it appropriate for most investors? Well…..
We realize that long-term disciplined investing is extremely effective. The truth is- we don’t have enough new articles on the website this week. We thought the headline sounds pretty compelling, and really we’re just competing for “clicks.”
Candid Remarks from Author: In December, when the stock market temporarily lost ground, people who had close to a million dollars in their 401k found their balances drop below a million dollars. Now that we think about it, how is this even a story?!
We are USA Today! We are a respected news organization. Why are we using “clickbait?” Times in the newspaper industry are tough…. You’ve got to do what you can to survive.
I apologize for my snarkiness, but this kind of reporting is poor for your financial health. Countless times, hard-working Americans see their investments falter because they pay too much attention to Fake Financial News.
Remember that 20 years ago, the financial news machine didn’t even exist. People have been successfully investing for hundreds of years. Fake Financial News does nothing but muddy the waters, create confusion and fear, and hurt long-term returns.
Remember that according to a long-term study by Dalbar Inc, investor returns are far below actual market returns. In fact, over the past 30 years, the stock market has returned an average of 10%. The return for an average investor? 4%.
Ignore the headlines. Stick to your plan. Watch videos about kittens. I believe it will give you just as much relevant information. Plus all that cuteness will lift your spirits.
Dave Kennon, Kennon Financial
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. Indexes are unmanaged portfolios and individuals cannot invest directly in an index. Actual results will vary.
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