News can be confusing for investors
April 15, 2024
News can be very confusing, writes Peter Watson.
We live in the modern age of 24 seven news streaming at us from our smart devices. That can cause a problem.
The psychology of news or more importantly how people interpret news is based on our desire to hear the bad things of life. News that is packaged to look like this is the best day ever would largely be ignored.
News about how the world is ending or at least falling apart is more appealing. That’s what we want to hear.
A business example would be if there were two very different companies.
One was very profitable, well regarded in the communities they operate and had long term employees.
The other is a firm that suddenly went bankrupt, laid off all their workers and its exit from business would be harm the small community they operated. That would be a very compelling news item.
A lot of news paints a gloomy picture. But looking at the world through the lens of investment opportunities can be quite optimistic.
The US stock market as measured by the S&P 500 Index has a 100-year history. Three out of every four years investors have made money by owning stocks. Only one in four years have those investors lost money.
During these years of financial gains there would have been countless stories that were negative. Investors that remained positive and continued to hold their stocks were very successful.
Stock values are largely determined by how much profit they will make. Forecasting profit means looking ahead for many years. Investors are more focused on the long-term outlook.
News concentrates on the problems of the day and in most cases that will not affect the longer-term profitability of the company.
Daily news can be depressing. Investing outlooks can be promising.
Peter Watson, of Watson Investments MBA, CFP®, R.F.P., CIM®, FCSI offers a weekly financial planning column, Dollars & Sense. He can be contacted through www.watsoninvestments.com
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