In an information-rich age, we are surrounded by news, rumour, gossip and speculation. In fact, some days there is so much breaking news, there is barely time to focus on your work. And when your day job revolves around investment, that effect is amplified.
Too much information?
Investment news comes at us in a fast and unrelenting stream, through print media, online finance sites, television, radio and social media. In fact, social media is becoming the most influential source of financial news out there. When you add in the information provided by online experts and that obtained from your favourite online trading forum there really is no end to the financial news that you can consume during a working day.
News you can’t ignore
So, does this mean you can just ignore it? Unfortunately, no you can’t. For investors, considering the implications of financial news headlines, whether they are dealing with trade wars, business decisions or political instability, is absolutely vital. In theory, every piece of news can be analysed for its potential impact on your investment decisions, and no matter how confident you may be in your investment strategy, you would be foolish to pretend that it cannot be influenced by global or national trends.
React but don’t overreact
The motto when it comes to breaking news is ‘react but don’t overreact’. Major financial news often causes a reaction in the market, but the market corrects itself extremely quickly, within a minute or so. It is unlikely that you are going to be able to process the information, adjust your investment strategy and make a profitable trade in the space of 30 seconds.
So, leave the panic trading to others. Instead, take a sensible, measured approach to the financial news. That means taking the time to think through the implications. A lot of financial news is delivered with hyperbolic or dramatic headlines, but you have to be able to see past that and make a cool assessment, resisting the temptation to overreact to individual news events. Ask yourself whether the news reflects a significant change or is a piece of information that is likely to affect the value of your portfolio. Those will usually be underlying, long-term trends that have deep or long-lasting effects.
Don’t dwell on bad news
The history of investment in the financial markets is full of seemingly apocalyptic events that have had major effects, yet have eventually corrected themselves. The world has endured wars, terrorist attacks, environmental disasters and financial crises, and at times, the markets have reacted negatively, but business as usual has always returned. The key is to remain alert, to know what is going on in the world, and to go deeper with your analysis. Don’t just conclude that the news is bad, try to assess how bad it is, and how significantly it will affect not just the markets, but your investment strategy.
Success in investment is all about sticking to your goals. The smart investor doesn’t ignore breaking news, instead they rationally analyse it, to see whether it requires them to re-evaluate their portfolio and risk exposure, and so steer a steady course to long-term success.