Your Biggest Enemy

[BTravlin]

This article seems to mirror the thoughts of many here about setting your course and ignoring all the noise.

Your Biggest Enemy May Be Financial News

 

[traineeinvestor]

Thanks for posting.

While I understand where the author is coming from, organisations and people who disseminate financial news are a very big positive for investors (including those who follow an allocate, index and rebalance strategy) because the rapid and widespread circulation of financial news (including opinions) makes a substantial contribution to the efficiency and transparency of the markets.

But blindly following the views of "experts"? This has long being shown to be a very bad idea.

Dan Gardner's Future Babble has a good explanation on why people making predictions are so often wrong: Future Babble: Why Pundits Are Hedgehogs and Foxes Know Best: Dan Gardner: 0971486363234: Amazon.com: Books

 

[Live And Learn]

I agree that following day to day news is bad for our financial and mental health. Following the long term guidance from experts (buy and hold, be sure to invest in low cost funds, establish and keep to your selected asset allocation) makes incredible sense. I don't need to watch the news - and the "doom and gloom" folks ... I have enough worry without their help

 

[martyp]

I think the small stuff you don't want to listen to but the big stuff like the European financial crisis and American political gridlock are things that are both financial and political and have the appearance of having global consequences. Like any other information you have to act on it base on your comfort with risk.

 

[foxfirev5]

Everyone here is responsible for their own situation. I have a hard time following anyone's advice. Particularly after John Bogle's advice around March of '09 - you need to get out when you can't afford to lose another cent. Just when the public needed reassurance he folded - look it up.
On the other side of the coin I'm a long time Vanguard investor who has stuck with low cost index funds through thick and thin. I just do my own homework and invest accordingly.

 

[haha]

Everyone here is responsible for their own situation. I have a hard time following anyone's advice. Particularly after John Bogle's advice around March of '09 - you need to get out when you can't afford to lose another cent. Just when the public needed reassurance he folded - look it up.
On the other side of the coin I'm a long time Vanguard investor who has stuck with low cost index funds through thick and thin. I just do my own homework and invest accordingly.

I don't see it that way. True, as things turned out, it would have better for these people to stay. But if it had been in 1929, or 1931, 1974, or 1982, and they really could not afford to go on and lose a lot more, they would have been cooked if they had stayed.

The term scared money does not refer to the investor's personality; it refers to his situation. Hindsight is always fun, but not really fair. In retrospect these people had poor a priori asset allocations. But if we hit very stressed times again, some of us will be shown to have very poor asset allocations also.

Ha

 

[foxfirev5]

I don't see it that way. True, as things turned out, it would have better for these people to stay. But if it had been in 1929, or 1931, 1974, or 1982, and they really could not afford to go on and lose a lot more, they would have been cooked if they had stayed.

The term scared money does not refer to the investor's personality; it refers to his situation. Hindsight is always fun, but not really fair. In retrospect these people had poor a priori asset allocations. But if we hit very stressed times again, some of us will be shown to have very poor asset allocations also.

Ha

Yes and lock in your losses. By the time you realize your in that much trouble there isn't much left to salvage. Like I say we're all responsible for our own situation.

 

[haha]

Yes and lock in your losses. By the time you realize your in that much trouble there isn't much left to salvage. Like I say we're all responsible for our own situation.

Bogle was giving anti-suicide advice. We all know that it is better to avoid locking in losses. The only thing worse is going broke; and this is worse. Real world investing cannot be boiled down to a few slogans.

It is obviously true that if you truly cannot afford to lose any more money, you should take your chips off the table, even though this will leave you with painful losses. Painful realized losses are nevertheless better than destitution.

Better to have figured this out in advance, but this asks for a lot of skill and also a lot of self knowledge- both of which are not real common.

Ha

 

[foxfirev5]

I think that we can agree that one should not take on more risk than they can handle. As I look back to March '09 I see why I didn't panic. My 45% equity stake had shrunk considerably, my homes worth 30% less and my job was on the chopping block. However, with no mortgage and a sizable % in cash I fgured I had enough to last 10-15 years worst case. Yes I've missed out on some potential big gains but never lost a nights sleep. A balanced approach, simply plodding along for the last 37 has worked. This strategy required little skill. a little luck, moderate lifestyle, and a long time horizon.
Tune out the noise, keep it simple and go about enjoying yourself. Nobody knows what the future will bring

 

[mickeyd]

Thanks for the article. I like Solin's ideas but wonder why he is confused as to why folks continue to read financial news.

 

[audreyh1]

Back in the early 2000s, I used to be one of those CNBC junkies who had it on in the background much of the day. It was somewhat entertaining and informative. I also followed several financial websites.

Then it became way too annoying. The coverage seemed to keep getting shallower and more sensational and spin was getting way out of hand. Noise!

We cut the financial news out years ago. Then national/cable news. A couple of years ago I even cut out the local evening news. It's just a bunch of noisy, shallow cr@p designed to be spoonfed to idiots and every time I think it can't possibly get worse, it does.

I easily pick up any "urgent" news of interest whether financial or not just on the regular web pages I visit, and then I can go research the issue at my own pace and inclination. Occasionally I find an informative article but often a 2 sentence summary is more than I need to know.

It's so liberating to be free of this stuff.

We spend time instead on group web pages more oriented to our hobbies and interacting with our peers who share the same interests. It creates a much more pleasant and rewarding world view.

Who cares about all the other cr@p going on in "the world".

 

[Gatordoc50]

I had lunch with Dan Solin a few years ago when he worked for IFA, a dimensional fund advisory firm. I was considering using his services but I didn't agree with the AA they recommended. They wanted to invest 50-50. and I wanted to stay at 100% equities as I had a lot of real estate. I've never seen the wisdom in paying an advisor to buy bond funds and ultimately decided not to pay for access to DFA funds either. My view of him is that he is an attorney who has done a great job of taking other peoples work and dumbing it down for the general public. He's also a genuinely nice person.

 

[jollystomper]

I actually use the financial headlines news in the context of Warren's Buffet quote:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

The problem most folks have is that, humans being creatures of emotion, they react emotionally. Headlines are, in my opinion, becoming less about informing but more about getting an emotional reaction.

 

[MooreBonds]

We cut the financial news out years ago. Then national/cable news. A couple of years ago I even cut out the local evening news. It's just a bunch of noisy, shallow cr@p designed to be spoonfed to idiots and every time I think it can't possibly get worse, it does.

I easily pick up any "urgent" news of interest whether financial or not just on the regular web pages I visit, and then I can go research the issue at my own pace and inclination. Occasionally I find an informative article but often a 2 sentence summary is more than I need to know.

I'm the same way. I don't have cable, and just utilize a few websites to keep on top of late breaking news. 99% of the 'news' I don't really need to know about.

 

[Badger]

We cut the financial news out years ago. Then national/cable news. A couple of years ago I even cut out the local evening news. It's just a bunch of noisy, shallow cr@p designed to be spoonfed to idiots and every time I think it can't possibly get worse, it does.

+1
Most of the time the commercials for the news gives as much info as the program. I don't bother with newspapers either. Around here it's mainly fluff and advertisments with a few wire stories to make it appear to be a legitimate paper.

I do admit to watching a couple of the Sunday "news" programs but mainly for the banter and humor.

Cheers!

 

[marko]

I wish there was a site/list of the results of all the experts. Some joker says "the sky will fall in six months" and it doesn't...nobody keeps track of whether these calls come true.

It would be really interesting..

 

[BTravlin]

I actually use the financial headlines news in the context of Warren's Buffet quote:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

The problem most folks have is that, humans being creatures of emotion, they react emotionally. Headlines are, in my opinion, becoming less about informing but more about getting an emotional reaction.

+1

Good point.

 

[rbmrtn]

I wish there was a site/list of the results of all the experts. Some joker says "the sky will fall in six months" and it doesn't...nobody keeps track of whether these calls come true.

It would be really interesting..

CXO advisory has something like that. They track some of the "gurus" record on market predictions.

Stock Market Guru Grades - CXO Advisory

 

[audreyh1]

+1
Most of the time the commercials for the news gives as much info as the program. I don't bother with newspapers either. Around here it's mainly fluff and advertisments with a few wire stories to make it appear to be a legitimate paper.

I do admit to watching a couple of the Sunday "news" programs but mainly for the banter and humor.

Cheers!

Oh yeah - I forgot to mention that we cut the newspaper out back in 2000 when we were traveling a lot and the newsboy didn't didn't handle our "stop the paper" requests in a timely manner. By then we could read it on line anyway.

DH discovered he saved a lot of time in the mornings even though he would scan the paper online at times. We certainly saved a lot in terms of recycling bulk.

When we switched to living in an RV full-time, we totally dropped all magazines, as we didn't want to deal with forwarding subscriptions under those circumstances, not to mention the heavy bulk of accumulated magazines.

Even though we live in a house now, we have maintained our strict "no printed magazines" policy.

The local paper around here is pretty good - but I can read it online whenever I wish.

Our neighbors had us picking up their paper when they traveled on short stints bestowing on us the offer to read their paper, and were so shocked when we returned the papers unopened as we explained that we "don't read the paper". Generational thing I suspect.

 

[galeno]

Most investors biggest two enemies are paying too much in portfolio expenses and treating the financial markets like a casino.

Another big enemy is not understanding the basic risks and returns of the main asset classes.

 

[Gumby]

My biggest financial enemy is the man in the mirror, in whom fear and greed contend mightily with objective, rational analysis. To my chagrin, reason has not always carried the day.