Why You Should Tune Out the Market's Gloom-and-Doom Headlines
June 25, 2018
By Michelle Holmes, CFA • Trust Investment Officer
Several years after graduating from college, I began studying for a professional designation while working full-time. It did not take long to learn how to tune out the noise around me and focus on the goal of passing my test. In today’s world of instant and constant information, it is hard to know what to focus on.
The top concern among Today's Investors
According to a recent SPDR Americas survey, the top concern among today's investors is "Geopolitical/International Trade Tensions" — and it's no wonder, with headlines like “Trump Escalates Trade War with Tariff Threat for European Autos” (from a recent Bloomberg article) flooding the news since earlier this spring.
But will a full-blown trade war have a significant impact on the U.S. economy or is this it just noise? As it turns out the impact is only estimated to be a roughly 0.2% drop in economic growth or GDP (gross domestic product) for 2019.
What the Top Concern Should Be, Among Today's Investors
A bigger danger to people's portfolios, then apocalyptic headlines, is the way people invest when they worry. Behavioral finance studies show that people dislike losing about twice as much as they like winning. A study from Oxford University provided by Fidelity Investments shows that “constant reminders of volatility may cause investors to seek more conservative investments - regardless of objectives or time horizon.” In the study, people who looked at their portfolios more frequently had almost twice as much bond exposure than those who reviewed their portfolios less often.
Having a Financial Plan Can Help.
Constant reminders of market volatility like looking at your portfolio frequently or worrying about current news headlines can shift investor focus from long-term goals and lead to investment decisions based on loss aversion. Yet it is hard to know what items to tune out in today’s world of constant free flowing information. Having a financial plan can help you establish long-term goals and keep you focused on what you want to achieve. Contact an advisor from Security National Bank Wealth Management to set up or update your financial plan today, and let us help you tune out the noise!