What's the point?

There is no point in checking your investments every day.

There is no point in trying to second-guess the markets.

And there is no point in reacting to media speculation. In fact, there’s probably no point in reading the news at all! A journalist told us that if you read a newspaper every day for 12 months, you know everything that’s ever going to happen because only the names and numbers change each year.

News, by definition, is new. It changes all the time. With the advent of the internet, it changes minute by minute. And with increased speed, comes reduced quality.

The cost of production has dropped too. Because pixels cost less to produce than paper and ink and postage, quality is driven down further.

Online news sources are (mostly) free – they make their money from ads, which means they are trying to please their advertisers more than their readers.

Finally, you’ve no doubt heard of ‘fake news’. It’s all too easy to spread an unverified meme all over social media with a single click.

If you want to be well-informed, don’t waste your life trying to keep up with rolling online newsfeeds. Instead, read quality publications that add value and will stand the test of time (such as our articles, we hope).

It’s not just us

Peter Westaway is the Chief Economist at Vanguard Asset Management in Europe. (The Vanguard Group is an investment advisor based in Pennsylvania with over $5.1 trillion in assets under management. They are one of the fund managers we use, and we’ve mentioned them before e.g. Join the investment revolution and Investing that’s as easy as A,B…F.)

Anyway, Peter was interviewed recently by Robin Powell, an avid writer about evidence-based investing. (As you probably know by now, that’s the kind of investing that we do).

Peter’s key theme was that people have always tried to predict the markets by extrapolating from the news, but that there is no relationship between them. For example, people might think that fast GDP growth relates to market growth (such as China) – but it doesn’t, because existing growth is already reflected within the price. Even world-shaking events, such as the Brexit referendum and Trump election, divided the ‘experts’ opinion on what would happen to the UK and US stock markets.

He says: “It is important and reassuring to understand what the economic backdrop is. But then to use that information to try to second-guess everybody else and to try to eke that extra bit of return out of their portfolios is a bit of a fool’s errand.”

Peter admits that, even as an economist with a list of qualifications as long as his arm, he is no better at making predictions than anyone else. If he can’t do it, then the rest of us have no hope. In short, forecasting through economic events is frivolous.

Read the full interview on the Evidence-based Investor blog >

What this means for you

Picking winners is difficult, so the best strategy is to have a diversified portfolio – it’s the drum we keep on banging.

At Plan 100, we manage your financial affairs so you don’t have to worry. In the time we free up for you, you can do something useful. Such as watching comedy (because laughter is good for you). For example, here’s a clip from the latest episode of a news-based series that we particularly enjoy:

Series 56 of HIGNFY starts on 5 October 2018.

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100