NewburyportNews.com, Newburyport, MA

Business

August 13, 2013

Let's simplify our financial decisions

When our values are clear, our decisions are easy. Getting clarity about what is genuinely important to us is challenging in face of the wealth of information literally thrown at us continuously: television, radio, the Internet, Facebook, Twitter, text messages and email. These electronic channels have certainly diminished the impact of information on paper, such as newsprint (alas, the medium of this very article).

Among all of the electronic messages bombarding us, how can we tell what’s significant for our living well and what informs us meaningfully?

The financial media, in particular, feed on our fear and anxiety that there just may be some bit of information we don’t know and on our feeling that knowing it this very minute will improve our situation somehow. And we, in turn, give credence to overconfident talking heads whose ability to predict the future direction of markets is worse than the weatherman’s predictions. At least the weatherman has science on his side.

If it is really and truly important to you that you know where the Dow Jones Industrial Average is on a daily basis and you want to grow your investments by day trading, then the deluge of data available should delight you. But most of us realize we have no control over the direction of the markets or their impact on our investments. Acting on continuous streams of financial data will not change outcomes for us.

In fact, many years ago a research psychologist found out that people who receive frequent news updates on their investments earn lower returns than those who get no news. Understandably, this research got no play in the financial media.

The sense of urgency conveyed in financial reporting suggests there’s something for us to do about this news we’re hearing or seeing. Yet, from my personal experience over that last 20 years and based on observations by other professionals, doing absolutely nothing at all is often the soundest response to what the markets are doing today and to the media’s interpretation of the meaning of the Dow’s ups and downs.

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