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What You Read and It’s Influence On You

I have written a lot over the years about the benefits of reading financial news.  In fact I actively seek out writings on the subject, especially those that differ from my own approach.  There are in fact benefits to this approach, but there are also down sides.  Be wary of the influence of investment articles on your actions.

A Review of My Investment Style

I have been fairly up front on this site that I invest using index funds with a slight tilt towards different sizes and regions of the world.  I do this due to simplicity and because individual stock picking is proven to lead to poor results for retail investors.  I also have a limited my investment in real estate, even if I am experimenting a bit in this area.  In the later because I tend to favor investing in things I know.

Alternative Investment Options

But there are many approaches to investment.  Some of which might be superior to my own approach.  Early Retirement Now had a great piece recently on how to beat the stock market.  I largely agree with much of his piece.  It boils down to leverage, diversification, and potentially tilting.   While I don’t really do the leverage thing, to some extent I utilize the other items although perhaps not quite to the degree his piece explores.  There are pieces in his article that I may explore expanding into over time. The post is a good read if you have the time.

Coach Carlson meanwhile does some great pieces on real estate investment.  Again an area I don’t signifIcantly play in.  But also an area I’m interested in exploring.  I will never be a big time real estate mogul, but I am interested in dipping my feet into the real estate realm.

Crypto Investments

But my investment reading does not end with these more normalized areas.  I read a lot of posts about Crypto over on Wall Street Playboys. Honestly  I probably will never buy crypto although I find it important to understand this alternative investing area.  Why?  

I agree with the hypothesis that a digital currency is the future and will increase in value.   But I simultaneously believe that there is no way to predict which digital currency is the future.  Something like Bitcoin might be the first mover, but it is entirely possible a new entry could kill off the other coins at any time.  Since none of the coins are actively used in trade today, there are little barriers to someone coming up with a new superior coin tomorrow that grabs the entire market.   

The existing value of those coins around today has no moat and only has value as long as the crowd believes that coin is the best option.    So while I enjoy the writing and agree with some of the analysis, I won’t be changing my investment plan to include Crypto any time soon.  I don’t have any desire to speculate on which coin will win.  But following that market in case the situation changes has value.  The difference between wanting to invest in the technology rather then the product…

All of the Above a Positive Influence on My Investing Style

All of these readings inform my investing strategy, not to mention I enjoy the writing.  But not all such investment writing has such a positive impact on my investing future.

Gold Investment Blogs, A Bad Influence on Me

Which brings me to gold investors…  Now I am going to say up front I’m not a fan of gold investing.  The historical data shows gold to have been a very poor investment versus other options. Even compared to inflation, depending on the year 0 you choose, it has been a poor investment.     If you had bought gold in the early 80s you would have spent decades under water while inflation moved ever forward.   

It’s purely a speculative investment with little historical evidence that it’s a good speculation.  The only exception seems to be in times of extreme market fear.  1980, 2008, and now with the surges around fear.  Given it does so poorly outside these fear surges, and once the fear surge begins it is probably too late to jump on the gold train, I just can’t get on board with it.  Note for the preppers, don’t even go into if the world collapsed gold would be it.  In that case I’d rather have food, a place to live, and something to hunt with.

My Problem is Not Gold Investment, It Is Writing About Gold Investment

While I would never “invest” in gold, reading about gold itself is not so much my issue.  No the issue is the rationale most gold investors use.  That is, the writing in this space is almost all about fear.  Fear of a collapse of sovereign currencies due to rising debt.  Fear of Government overstep leading to currency used as a control.  I could go on but you get the idea.

Fear is a Bad Influence On My Investment Style

The problem with following articles that heavily write about gold, for me at lest, is that an overall influence of fear.  Over time the more articles you read promoting the end of the world as it is today, the more you begin to question your safety.  It can easily cascade to questioning your entire investment portfolio if you let it.  This is true even if you know intellectually that the case given for gold is the worst case situation where money would likely be your lowest priority.    

There are some very talented writers in the personal finance space that like gold.  Some of them write almost exclusively about the future of gold.  However, I stopped reading them years ago because I understand the psychological impact of such posts on me.  They made me question my investment plan and risk one day acting on those questions in a rash moment. Note not everyone will be susceptible to such issues. Part of emotional intelligence is understanding how you react to such topics.

Everyone Can Be Negatively Influenced By Financial News

Want a great example of this that does not involve me?  How many people bailed out of the stock market last March thinking the Pandemic guaranteed a market collapse.  It seemed guaranteed in so many articles that the stock market was about to collapse. Where are we now on the price of the market?  Higher then the stock market has ever been less then a year later.

That isn’t to say that the market won’t collapse in the future, it certainly will.  But my crystal ball can’t tell you when. I can’t even say if collapse means from the all time high or from the point the market sits at today.  Lest we forget in 1996 Alan Greenspan wrote about Irrational Exhuberance.  The dot com crash where Irrational Exhuberance came to roost, as bad as it was, never dropped below the market cap of 1996.  No one knows anything about the future.

Lizard Brain Versus Logic With Too Much Bad Influence

I inherently know bailing on the stock market is a bad idea.  And no I didn’t bail and have not.  But I also know if I consume too much of these doom and gloom pieces I begin to question what I know rationally is true.  My lizard brain tries to take over and make me act on emotion rather then logic.  

Removing Emotion is The Key to Investing Success

If you remember though, the key to investing success is always to remove emotion from those decisions as much as you can.  It’s why I recommend a detailed investment plan you put in place months ahead of time.  It will allow you to make a logical decision on your future investment direction rather then emotionally deciding in the moment.

All Things In Moderation, Including Reading Financial News

Reading too much doom and gloom, or even optimism on the other side of the coin, can cause you to abandon those decisions you set earlier.  So I guess what I am saying is all things in moderation.  It’s fine to read about currency collapses or pandemics from time to time.  But be careful not to immerse yourself in it.  You don’t want what you read to blindly drive how you invest.  For better or worse, for me, too many gold bug pieces focus too much on doom and gloom for my own good.

Is there any type of investment writing you avoid?

8 Comments

  1. Xrayvsn
    Xrayvsn January 25, 2021

    Great read. Yes sometimes reading something can influence you so much that you deviate from what you originally wanted to do.

    It is good though to keep reading alternative views otherwise you might find yourself in an echo chamber and be overly concentrated in one thing setting you up for a bubble or fall.

    Its a tough balance.

    • FullTimeFinance
      FullTimeFinance January 28, 2021

      Exactly that, a balancing act.

  2. TPM
    TPM January 25, 2021

    I agree completely that what you read influences your investing behavior. I am a voracious reader and try to improve my knowledge over time.

    As you know, I prefer individual stocks because I like to know and understand what I am invested in.

    Most of the folks I have encountered that make mistakes and panic sell, are invested in things they don’t really understand. This is one of the reasons why I am cautious on indexing.

    I think more people would benefit by reading. Like you say, reading things that have different points of view are especially beneficial, if you are open minded.

    The more you read, the more you understand that you have so much more to learn.

  3. Q-FI
    Q-FI January 25, 2021

    I have a bad habit of checking financial news too often… hahaha. Even though probably like 80% of my net worth is in index funds, I still like to know what’s happening. That being said, even though I watch the markets I don’t actively trade any longer. It’s probably been several years since I’ve bought an individual stock besides RSUs or Company stock. I had my time in my late twenties and early thirties when I loved to actively trade. But as the years go by, the more passive and simple I can make my investments, the happier I have been.

    I think its good as you mention to continue to learn about alternative investment strategies. And for most people, excessive financial news is probably not a good thing (even me included… haha). Luckily, I have never been a trigger happy guy.

    Good post bud.

    • FullTimeFinance
      FullTimeFinance January 28, 2021

      Thankfully I’m not very trigger happy either. But I did start to see my risk tolerance waiver after reading one or two sites. Regular news never bothers me so I just had to cut that one out.

  4. { in·deed·a·bly }
    { in·deed·a·bly } January 26, 2021

    Recognising you don’t already know it all is half the battle.

    Choosing what subjects and whom to (and not to) learn from is just as important.

    I try to avoid the shallow end of the investing content pool, where the market always goes up; “safe” withdrawal rates are guaranteed; all Vanguard all the time; and you can save your way to riches.

    I’m also cautious of those who have a vested interest in the advice/guidance they provide. Results in talking their book, potentially creating a conflict of interest. Case in point might be a PF blogger with a monetised guide to creating a PF blog.

    • FullTimeFinance
      FullTimeFinance January 28, 2021

      Always a great point. You really do need to be careful to understand the motivation of the person writing the piece. Sometimes you the reader is the customer rather then just the reader.

  5. freddy smidlap
    freddy smidlap January 28, 2021

    i like to read financial stuff with results included. this is what we tried and this is what worked and what did not. you don’t get that very often – real life return transparency.

    i still watch cnbc many afternoons for amusement. they talk about the big hot names like tesla, moderna, and bitcoin. what i don’t hear much are discussions around growth stocks. those talking heads have been squawking about “valuation” concerns around amazon and netflix since they sold for 2 bucks a share!

    i agree to be careful what you consume too seriously.

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