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"In the investment business, you go to school every day, but never graduate." - Don Hodges

More ESPN, Less CNBC

by Alan Ebright, on Aug 4, 2021

Why watching too much financial news can do more harm than good.

When I bring on a new client, especially the ones who are entering retirement, I have a brief discussion about how viewing too many financial news programs can really mess with one’s head. Investment plans are something that are usually put together for a multi-decade time frame, so worrying about the day-to-day market minutiae is probably not the best way to spend one’s time.

I remember way back in the late 1970s, when I first took an interest into investing, my folks would show me how to find the stock prices in the morning paper. For one summer, I wrote down the daily closing prices for a handful of stocks. Wasn’t much to it, and it was pretty fun. After a few days of doing it, I realized that I was writing down the prices of where the stocks closed at 4pm EDT the prior day, yet I was reading the paper at 7:30am the next day. I asked my folks about how you could find the price right now, and the answer was “You have to call your stockbroker.” Might seem antiquated, but those might have been saner times.

So, here we are 40 years later, and not only can you make your own buy/sell decisions with only a few keystrokes, but you can find a quote for any stock on the planet in real time. Ah! Technology! Yes, this is a very nice convenience, yet it might provide too much information for the average investor to digest. Now, you throw in 12 hours of financial news on 4 different channels, and this has led to severe information overload in our society.

To be clear, in no way am I criticizing the content of these news shows, as there are many bright minds who are interviewed on a daily basis. What I caution my clients from doing is reacting to opinions and then making snap decisions that could really hurt their long-term returns. So, what are my remedies you might ask? Here are a few simple tips that have kept my client’s emotions in check.

  1. When you read something worrisome, call your advisor. Most likely they’ve seen the same news item and can rationally talk with you.
  2. Check your statements monthly or even quarterly.
  3. Remind yourself that your plan is a lifetime plan, and part of it involves markets that temporarily go down.
  4. If you must check your mobile phone for your stock quotes, toggle it from “$ change” to “% change.” Once you realize that your favorite stock being down several dollars is only, say, -.5%, it’s much more palatable.
  5. Don’t look at a specific stock’s return (up or down). It’s the return on the entire portfolio that is important.

If you’re a working professional and decided to hire an advisor, trust in your advisor. They’re professionals and monitor markets daily. Your efforts would be better directed at your profession which you know so well. If you’re retired, enjoy your retirement. Travel, hit the golf ball, spend time with family and friends, and watch entertaining shows. You didn’t put in 40 years of work to then spend several hours a day obsessing on the market.

 

There are lots of things on Wall Street that overstimulate your senses and shorten your focus, and a short focus is not conducive to long profits. - Warren Buffet

Hodges Capital Management, Inc. is a Federally Registered Investment Advisory Firm registered with the SEC.  The above discussion is not intended to be a forecast of future events, a guarantee of future results, and should not be considered a recommendation to buy or sell any security. Past performance is not indicative of future resultsInvesting involves risk. Principal loss is possible. Investing in smaller companies involves additional risks such as limited liquidity and greater volatility. No current or prospective client should assume that information referenced in this communication is a recommendation to buy or sell any security. Different types of investments involve varying degrees of risk. No client or prospective client should assume that any information provided is a substitute for personalized individual advice from the adviser or any other investment professional.  This document was created for informational purposes only and the opinions expressed are solely those of Hodges Capital Management, Inc.

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The Hodges University Blog is designed to keep our clients educated and abreast of certain major news headlines. We aim to help investors separate the news from the noise by providing our perspective.

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