Picture of headphones and blog title (how to drown out investment noise)

Don’t be a distracted investor – learn how to drown out investing noise

Don’t be a distracted investor – learn how to drown out investing noise

OCTOBER 4, 2017     AUTHOR: SHAUN

For investors, access to information is a double-edged sword. It helps you stay informed, but too much of it can create “noise” and cause you to rethink your investment. You need to use news and data for good, not be distracted by it.


Information is everywhere. It’s on your laptop, it’s pushed to your inbox, and it’s even sent real-time through alerts on your smartphone. It’s hard not to find the latest news everywhere you look.

The same is true in the investing world. In fact, I’d take it one step further. Not only is news readily available, but there’s also no shortage of recommendations on what investments are right for you!

But is there such a thing as too much?  Too much news, headlines, and data.  So much so that it becomes noise?

For investors, access to information is a double-edged sword

On the one hand, access to news means you’re always up to speed on what’s happening. You know what’s going on in the world, and when new opportunities emerge. If harnessed, it can help you make more informed investing decisions.

The other side of the coin though isn’t as appealing…

Too much news can leave investors feeling lost, confused, and even frustrated. Buy today! Sell tomorrow! Go all-in on stocks!  Load up on Bonds!  If you’re not careful, all of this becomes information bombardment and results in over-analyzing, over-trading and lower performance.

Too much info can cause you to over-analyze (and spin!)

Too much information can cause you to over-analyze your investments. Instead of focusing on what matters, you end up “boiling the ocean.”  You try to make sense of every news article, financial number and press release. Eventually, you run more metrics than what’s useful, and you get bogged down in information. By the time your research is done, you may have forgotten all together why an investment stands out!

Be careful not to get stuck in “analysis paralysis” and miss buying into a good investment at a good price. 
 

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Too much info can result in over-trading

Let’s be honest, sometimes we can be our worst enemy. Instead of using information for good, it ends up hurting us. Online media, TV and analyst recommendations are helpful… to a point.

If you’re too plugged in, it’s easy to get distracted by the latest shiny object. What seemed like a sound investment last week, no longer has its appeal.

Instead of buying, holding and benefiting from long-term growth, you can end up following the herd, attracted to the latest trend. This results in over-trading as you buy and sell frequently.

The problems?

For starters, it costs the average person a lot in commissions over time. Each time you buy or sell an investment, there’s some sort of transaction fee/commission.  Worse yet, when you over-trade you often miss out on the well-awaited rally you’ve been anticipating for on the stock you previously held.  If you were just a little more patient, you might have seen that rally!

Instead, buy, hold and drown out the noise

Instead of following the latest trend, focus on what’s relevant to you. Keep the “day-trading news” at bay, while maintaining an eye out for emerging opportunities.

Nothing beats applying a consistent long-term approach to investing. Some people can time the market, but that’s usually with the right combination of luck, specialty knowledge, and experience. Don’t try it!  Instead, set a strategy that’s right for your investment goals and stick with it.  You’ll be rewarded for your patience.

Easier said than done? Yes, but it’s worthwhile in the long run. The market often rewards those who are consistent.

Try to keep in mind that some “boring” businesses that don’t make headlines every day can be good buys! If you focus on the news only, you’ll often miss some of these golden prospects. Take the railroad industry as an example. It’s not as sexy as the latest tech gadget, but it sure is a profit-making engine! Over the years they have consistently outperformed the market.

This investing style isn’t new and has been taught from legends like Warren Buffet for years. These “boring” businesses are some of his favorites. They don’t always make headlines, nor do they produce new products frequently, but they sure do produce consistent results.

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SWP Action Steps

Don’t rely on media channels to make every investing decision.  Make your own decisions after careful and broad research.  For every recommendation online, I bet you can also find an opposing view.  So don’t treat your first source as gospel!  Learn from as many channels as possible, then make your own decision.

I’d also make sure you’re dialing into reputable news channels.  Choose carefully!  A lot of media sources love to display hype just to get you excited.

The best thing long-term investors can do is build a strategy that’s right for you, and stick to it. In the end, if you stay focused, do your research, and remain patient over the long-term, you’ll be rewarded.

Think it through

  • What type of news/data/subscriptions do you pay attention to? What might be considered helpful vs. distracting?
  • How are you analyzing your investments? Where do you need to go deeper?  Where should you trim back?
  • What hurts your ability to be a consistent investor?

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