Is the financial media a help or hindrance?

Is the financial media a help or a hindrance when it comes to investing?

Many people turn to the news media for information when making investment decisions. But with its inevitable focus on stock market volatility and where markets might be heading next, the financial media can distract you from what really matters. It might be entertaining, but from an investing point of view it may do more harm than good.

In this video, financial journalist Louise Cooper offers a refreshingly candid insider's view. Her core message is simple: you can't predict what a market is going to do, and if you miss out on the big "up" days, it seriously damages your long-term performance. Those two facts point to one strategy, buy and hold. Invest regularly, whether monthly or weekly, using pound cost averaging, keep saving, and put your money away. Ignore what the news tells you and follow the academic research instead. The daily movement of markets, she argues, is interesting from a news perspective but utterly irrelevant from an investment one.

You'll learn that this doesn't mean ignoring financial news altogether, it can be genuinely fascinating, but that you shouldn't let it guide your investment strategy. Cooper describes how she consumes the news avidly, watching share prices, economies and markets, yet it has no impact whatsoever on how she invests. Every month, money goes into her pension, her husband's pension and her children's future savings, always into the same funds, regardless of what the headlines are saying.

The video also highlights another problem: low-cost passive investments receive far less coverage than actively managed funds, largely because the active fund industry spends enormous sums on PR and advertising. Cooper explains a point she feels the media often misunderstands, that passive investing isn't trying to top the performance charts. Active funds may "blow the lights out" one year and disappoint the next, but a passive fund simply aims to capture the average, year after year, decade after decade, which over forty years can produce outstanding results. It's never designed to be the top performer in any single year, which is exactly why she suggests ignoring the fund performance charts that appear everywhere.

The takeaway: financial news can be entertaining and even fascinating, but from an investment point of view it's far less useful than you might think. The wiser path is to tune out the noise, invest regularly, hold for the long term, and let a low-cost, evidence-based strategy quietly do its work.

Chapters / Key points

• Why people turn to the media for investment information
• How the media's focus on volatility distracts investors
• Louise Cooper on why you can't predict the markets
• Why missing the big "up" days hurts long-term returns
• Why buying and holding regularly is the answer
• How a financial journalist consumes the news but ignores it when investing
• Why passive investments get far less media attention than active ones
• Why passive isn't trying to top the performance charts
• Why you should ignore fund performance charts

Transcript

Is the financial media a help or hindrance?

Robin Powell: One of the places that people look for information when making investment decisions is the news media. But, with its inevitable focus on stock market volatility and where markets might be heading, the media can distract you from what you really need to focus on. Louise Cooper is herself a financial journalist.

Louise Cooper: You can't predict what a market is going to do, you can't. And if you miss out on the big up days, it seriously impacts your long-term performance. What those two facts tell you: buy and hold. Buy and hold. Buy every month, pound cost averaging, every week, whatever it is. Pound cost averaging, buy regularly, that is the way to do it. So ignore what the news tells you, follow the academic research. Buy and hold regularly, save, put your money away. Forget about what the market does, it's interesting from a news perspective, utterly irrelevant from an investment perspective.

Robin Powell: That's not to say you should ignore financial news altogether. It can be very interesting. But you certainly shouldn't let it guide your investment strategy.

Louise Cooper: So I consume the news, I look at share prices, I look at what's going on. It has no impact whatsoever at all on how I invest. At all. I look at the economies, I look at the markets, I look at all of it. It does not stop me from doing what I do, which is, every month money goes into my pension, every month money goes into my children's future savings, every month money goes into my husband's pension. We don't change the fund we're in, we're always in the same fund. I read it all, I find it fascinating, I love it, no impact on how I invest at all.

Robin Powell: Another problem with the financial media is that low-cost, passive investments receive far less attention than actively managed funds. The main reason for that is that the active fund industry spends huge amounts of money on PR and advertising.

Louise Cooper: The other thing I don't think the media truly understands is that passive is not trying to blow the lights out. Because you blow the lights out one year and have amazing performance, but then the next year you have terrible performance, that's how active works, generally, OK? So in any given year, passive is very unlikely to be one of the top-performing funds. But it doesn't need to be. That is the point. Average, year after year after year after decade after decade, will blow the lights out over forty years. You don't need to blow the lights out. The whole point in passive is that it's never going to make the top of a performance chart because it's not what it's trying to do, it's not what it needs to do. So that's another thing, ignore performance charts for funds, and yet they are everywhere.

Robin Powell: In short, financial news might be entertaining. But, from an investment point of view, it's not as useful as you might think.