Family Update
Jesse and I have been working hard in the gym. We often talk about protein and watch YouTube videos and read articles on how much we need to build muscle. One morning, while Grammy was visiting, I came downstairs to find Jesse eating chocolate pretzels for breakfast. I said, "Jesse! How are you going to build big muscles if you don’t get enough protein?" He looked at me, confused, and pointed at the box. "But this is milk chocolate," he replied.
I won two more blue ribbons at the Venice Orchid Festival, and I am really getting addicted to it! One of the orchids was so good it was elevated to special judging by the American Orchid Society, which is known for being particularly strict and selective. On the feedback sheet they returned to me, it said: "Well flowered, but we'll pass."
Grammy, who came down from Pittsburgh, joined me at the Venice show "just to check it out." She left with an armful of orchids. These sales can be dangerous to your bank account.
For those who know me, it’s clear that I am a passionate person. I am deeply committed to helping individuals live their best lives in retirement, and this begins with solid financial planning. One thing that truly frustrates me is anything that prevents my clients from achieving their best life.
And oftentimes, my anger is directed toward the financial media.
Don’t get me wrong; the financial media is not innately evil or working against you. But here is an ugly truth they don’t want you to think about: they only exist to sell advertising. It takes a lot of content to fill all those hours on TV and radio programming, and much of the time, the financial media propagates ideas that are not only wrong but harmful to your financial health.
I spend a lot of my time helping people tune out 95% of the noise that does nothing to help their financial futures.
5 myths the financial media wants you to believe. And why you shouldn’t.
Myth #1: Your investments will suffer if you ignore the markets.
Of course, CNBC wants you to believe that following the markets on a minute-to-minute basis is important—how else can they keep you watching all day?
Warren Buffet put it best: "I would tell (people) don’t watch the market closely… The money is made by investing and owning good companies for long periods. If they buy good companies and buy them over time, they’re going to do fine…If they’re trying to buy and sell stocks and worry when they go down a little bit … and think they should maybe sell them when they go up, they won’t have very good results."
Myth #2: You must listen to the "super-smart Wall Street guys" to be a successful investor.
Nope. Not remotely true.
In fact, the longer I manage money for clients, the less I listen to anyone’s "opinion" on the markets. Here is an article titled, "‘It’s Going to Collapse: 5 Scary Stock Market Predictions From Smart Investors." It's really worth looking at. It is comically wrong.
It's humorous to consider that this article was written in 2017. Since then, the markets have risen by over 100%. If you were among those who read this article during the summer, you would have missed out on a significant market rally.
It is impossible to predict when the stock market will rise or fall. Throughout history, no one has consistently forecasted the market's fluctuations.
Every once in a while one of these guys gets lucky. They then proceed to promote that fact for the rest of their lives. Why does the financial media keep interviewing you if you are right once and wrong 100 times? (Spoiler alert: It’s about filling air time.)
Myth #3: Market experts know why markets go up and down.
I hear it all the time … the market drops a few hundred points and the media has all kinds of rationales. "Bad unemployment numbers came in." "Chinese currency fluctuations are affecting exports." "Instability in the Middle East is unnerving investors."
I have a counter-cultural truth for you here. The vast majority of the time, nobody, not even after the fact, truly knows why the markets went up or down.
They can hypothesize as to some reasons why it might have fluctuated, but at the end of the day, no one ever knows for sure. The reality is most movements in the market come from irrational human fear and greed. And human behavior is notoriously hard to predict. During COVID the markets were up sharply. Explain that one.
Whenever someone asks me how I feel about what the markets will do this year I gently respond, "I don't know and it doesn't matter."
Myth #4: It is important to continually buy and sell stocks inside your portfolio to maximize returns.
Here they go, filling air time again.
If Jim Cramer were honest, he would say, "These stocks might go up or might go down. Nobody really knows. But we do know that a long-term, disciplined strategy has proven incredibly effective at building wealth."
Of course, if he actually admitted that, there would no longer be any reason for him to have a show. Bad for Cramer, bad for advertisers.
Better for you.
By the way, people have been tracking Jim Cramer’s picks for years, and you would have been better off putting all of your money in the S&P 500 and just letting the money sit.
"Cramer Picks" underperformed the market as a whole.
If you had invested $1000 in 2000, by 2017, Cramer's picks were worth $1,975. If you had just invested in the 500 biggest stocks in the U.S., that same $1000 would have grown to $3,071.
Not to mention the cost of trading and the impact of taxes can be substantial when you are constantly buying and selling stocks.
Myth #5: Financial advisors watch the financial media to get the information they need to help their clients.
No, we don’t.
I can’t speak for everyone in my field, but I can say that I have never met a fellow advisor who buys and sells stocks based on what some guy on Fox News Business says.
With the advent of the internet, a universe of information is readily available at the fingertips of anyone with a cell phone. Nobody is going to say something on TV that hasn’t already been revealed and researched by thousands of investors on the internet.
This is a big reason why buying some unknown stock seems so antiquated. There really is no such thing anymore. Now, if anything, my main job is to help my clients determine what they need to save and what they can spend. It’s about planning, not frantic buying and selling.
The other part of my job is sifting through the deluge of information my clients (and all of you) are subjected to and discern what is actually relevant.
In conclusion, it's essential to understand that financial media—whether on TV, radio, in newspapers, or online—is mainly entertainment, as engaging content attracts advertisers. It is vital not to let this distract you from prudent planning and long-term investing.
And for heaven's sake, delete the stock app from your phone.
Be Blessed,
Dave