Financial media and how to read it

Financial media exists to be consumed daily, and investment decisions are appropriately made every few years, which is a fundamental mismatch.

The structural problem

Which is not about quality.

Media must produce content continuously regardless of whether anything meaningful has happened.

Which means daily movements require explanation, and explanations are produced whether or not a cause exists.

Attention is the business model, and attention responds to drama, novelty and threat.

None of which corresponds to what matters for a portfolio held for decades.

The recurring formats

Worth recognising.

Explanation of a daily move, generally attributing a small random fluctuation to a specific cause.

Forecasts, which have the poor record discussed elsewhere on this site.

Best and worst performing lists, which encourage performance chasing.

Warnings of an imminent crash, produced continuously and correct occasionally.

Profiles of successful investors, which are survivorship bias presented as instruction.

And thematic coverage of whatever has recently performed well, which is precisely when future returns are lower.

The evidence on attention

Which is relevant.

Research has found that retail investors are net buyers of attention-grabbing stocks — those in the news, with extreme returns or high volume — which is consistent with attention driving purchases rather than analysis.

And studies of myopic loss aversion find that more frequent evaluation of a portfolio leads to lower risk-taking and lower returns.

Which means media consumption affects behaviour through both channels: what you notice, and how often you evaluate.

What is worth reading

For balance.

Analysis of what has happened and why, as distinct from prediction of what will.

Long-run evidence and base rates.

Explanations of how products and markets work, which is genuinely useful.

Regulatory publications and consumer alerts.

Academic and practitioner research.

Company reports and fund documentation for things you hold.

And material that makes you less likely to act rather than more.

What to be sceptical of

Specific markers.

Confident specific predictions, which should attract more scepticism than uncertain general ones — the opposite of how they are usually received.

Anything with an implicit call to action.

Content where the author's position or incentive is undisclosed.

Performance figures without the period, the benchmark or the costs.

Cherry-picked start dates.

Anecdote presented as evidence.

And anything that would be equally publishable with the opposite conclusion.

Social media specifically

Where the problems compound.

Algorithmic amplification favours extreme claims and confident presentation.

Survivorship is extreme: successful trades are posted and unsuccessful ones are not.

Undisclosed promotion is common and is regulated in several jurisdictions, with enforcement action taken against undisclosed paid promotion of financial products.

Regulators in several markets have introduced rules on financial promotions by influencers.

And the pace and social pressure combine to produce exactly the conditions in which the behaviour gap widens.

A practical diet

What some investors adopt.

Check the portfolio at a defined interval — annually or quarterly — rather than continuously.

Remove price notifications from devices.

Reduce consumption during volatile periods specifically, which is when it is least useful and most compelling.

Read fewer, longer things rather than more, shorter things.

Prefer material about how things work to material about what will happen.

And notice whether a source makes you want to act, which is the most useful diagnostic.

The test before acting on anything read

A short list.

Does this change anything about my objective or my horizon?

Is this information already reflected in prices, which for anything publicly reported it is?

Would I make this change if I had not read this?

What would have to be true for this to be wrong?

And does my written plan already cover this situation?

Almost all financial news fails these tests, which is the point.

The alternative use of the time

Worth stating.

Time spent following markets produces little for a long-term investor.

The same time spent on the contribution rate, the fixed costs, the career, or the things a portfolio exists to support produces considerably more.

Which is an unglamorous conclusion and is what the evidence supports.

General information only, not investment advice. Investments can fall in value and past performance does not indicate future returns. Consult a regulated financial adviser.