The financial media can hinder investors as well as help
- Robin Powell
- Mar 17
- 4 min read
Investors often turn to the financial media for guidance on where to put their money. Headlines highlight market volatility and try to predict what might come next. However, this focus can distract from the most important aspect of successful investing: consistent, long-term behaviour.
According to LOUISE COOPER, the key is to ignore market predictions and focus on steady, regular investing. Trying to time the market based on news updates is a losing game and can seriously damage your long-term returns.
Louise Cooper points out that following academic research and practising disciplined buying such as pound cost averaging will serve investors far better than reacting to every headline. Even though the news is interesting, it has little to no relevance to effective investment strategy.
KEY TAKEAWAYS
1. Market predictions rarely help investors
The media’s focus on short-term market movements can tempt investors into making rash decisions. However, markets cannot be predicted reliably. Consistent investing through good and bad times works much better.
2. Regular investing beats reacting to news
Investing the same amount each month, regardless of market conditions. This steady approach, known as pound cost averaging, reduces the risk of poor timing and builds wealth gradually.
3. Passive funds get less financial media coverage but often outperform
Active fund managers spend heavily on marketing to stand out in the media. Passive funds do not aim to top performance charts yearly but provide steady, reliable returns over decades, a fact often overlooked by the financial press.
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TRANSCRIPT
Robin Powell: One of the places that people look for information when making investment decisions is the 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 think about.
Louise Cooper: You cannot predict what a market's going to do. You can't. And if you miss out on the big updates, 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.
RP: That’s not to say you should ignore financial news altogether.
It can be very interesting. But you shouldn’t let it guide your investment strategy.
LC: 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 does not stop me doing what I do, which is every month money goes into my pension.
Every month money goes into my children's, you know, 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.
RP: Another problem that low-cost, passive investments receive far less media attention than actively managed funds.
The main reason is that the active fund industry spends huge amounts of money on PR and advertising.
LC: The other thing I don't think the media truly understands is 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. Okay. 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 40 years. You don't need to blow the lights out. The whole point in passive is 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 is another thing. Ignore performance charts for funds. And yet they are everywhere.
RP: In short, financial news might be entertaining.
But, from an investment point of view, it may not be as useful as you think.
