Truth #8 of 101: Information is Toxic

The nightly news, daily stock market television programs, and cable news focus on variability to get your attention. (Just turn on Fox, CBS, NBC, ABC and they are all vying for your eyes.) They bombard you with the equivalent of “noise,” short-run data, and statistics that are useless. Paying attention to the short-term market fluctuations and newspaper headlines will completely disintegrate your peace of mind and ultimately your portfolio.

No one said it’s bad to watch the news and keep your “thumb on the pulse” of what’s going on. I recommend that you don’t use their “news” to make your investing decisions. The media makes money off of information – and they package it so it’s exciting to watch.

Psychologist Paul Andreassen of Harvard studied the link between the news media and investing. Andreassen found that the group of investors that had access to the news earned less than half as much per share traded as the group that received no news. (Andreassen, Paul. 1990. “Judgmental Extrapolation and Market Overreaction: On the Use and Disuse of News.” Journal of Behavioral Decision Making 3: 153-174.)

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