Don’t Chase After The Market News

In today’s world, a host of information is at your fingertips any time of day or night. That means stock market news is available the second you want it. While you may think following the news to manage your stocks—make changes based on what’s happened or what you think might happen next—is a smart strategy, all you’ll really do is drive yourself crazy.

The stock market is in constant flux, with changes triggered by any number of factors including company earnings announcements or political events. However, chasing such news is a common mistake. Here’s why:

  1. The latest news is usually already behind. We think of news as instantaneous, but the stock market usually moves ahead of the news. In fact, economic developments, trends and investor’s inclinations typically come to light six months after stocks; so by reacting to news you will more than likely be too late to benefit.
  2. Don’t believe everything you read. If it’s on the Internet it must be true, right? We all know that our age of news ratings and instant information often leads to errors and sensationalized stories. Small market changes don’t indicate market collapse, even if your news anchor infers that it does. Take reports of impending doom with a grain of salt and always question what you read or hear.
  3. Vital information is missing. If you keep an eye on market news, you’re getting the latest information, right? Not really. Mutual fund managers or professional analysts who monitor and interpret financial data have a lot more information than the average investor, and they get it much sooner. Markets tend to move based on the decisions of these professionals, so thinking you can make decisions based on what you see on the Internet or news leaves you at a disadvantage.
  4. Fewer things are more difficult than market timing. In fact, it may be impossible. Successful market timing requires significant skill or luck. Possibly both. The better approach is to make methodical and consistent long-term investment decisions based on fact—not instinct or hunches.

Instead of worrying about what you hear on the news, focus on building a diversified portfolio combining stocks, bonds, and other investments with a sound strategy designed to move you toward your financial goals.