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الثلاثاء، 3 أبريل 2018

Should a Person Pay Attention to Financial News?

This started off as a reader mailbag question, but as many of them do, the answer ended up with so much detail that it grew into an article of its own. Lori wrote in to ask this:

What financial news do you pay attention to? FBN? CNBC? Do you read WSJ?

My initial answer was straightforward: I don’t really pay any attention to financial news at all. I don’t watch Fox Business Network. I don’t watch CNBC. I don’t read the Wall Street Journal.

Why not? The reason is really simple. I read things for three reasons: I’m learning about a topic, I’m shaping my opinion on an issue, or I’m preparing to take action on something in my life. The vast majority of “news” out there doesn’t do any of those things.

First of all, fast news reporting is often factually incorrect. Accurate facts often take a little while to become clear – the initial reporting right after a major event is usually at least a little inaccurate. Thus, I usually don’t feel the need to know more about an extremely recent event other than the one sentence summary, because the details are usually a mix of right and wrong. I don’t want to know those details until the truth has been figured out, and that takes time.

Second, I put little value in “quick” opinions, the kind that are typically shared on cable news. There are some newspapers with good editorial and opinion pages, but for the most part, “quick” opinions and “hot takes” aren’t useful, either. They’re usually snap judgments based on the hurried reporting mentioned earlier.

Finally, I’m never going to take action based on things that are hurriedly reported, nor am I going to take action based on someone’s “hot take.” I’m not going to change what I’m doing based on anything I see on CNBC or FBN. It’s just not happening.

So, if I’m not really learning anything, I don’t trust the opinions, and I’m not going to take action, there’s no real reason to pay attention at all, so I don’t.

To me, it’s a form of entertainment, but there are much better forms of entertainment out there. I’m going to laugh a lot more watching a well-written comedy or be compelled by a well-written drama.

Furthermore, I generally feel like it is a really poor idea to take significant financial action on anything without being factually well informed and having a strong understanding of why you’re taking that action. Since I don’t fully trust “breaking news” reporting or “hot takes,” I’m definitely not taking action on it.

So, how do I keep up with things, then, if I don’t watch cable news and don’t really read current reporting on events?

I browse a lot of independent personal finance blogs. The exact ones I follow change constantly, mostly because interesting ones constantly pop up and then disappear just as quickly because the people involved discover it’s a lot of work to keep them updated with decent, thoughtful content, and when people burn out they often let the site die on the vine. If I gave you a “top ten” list of my favorite ones I’ve ever read, virtually all of them would be defunct now (I remember sites that I really enjoyed that stopped publishing in 2007 and 2008). I usually find new sites because readers send me articles from them to read, and if the articles are interesting, I stick around for a while.

I tend to enjoy these sites because they’re steeped in personal experience and the opinions are unvarnished. It takes a lot of work to start your own site and write thoughtful long-form content, and when people do it about their finances, it usually comes from the heart. I love reading how different people see different angles in the core principles of personal finance. I love reading about people coming from different backgrounds and how they approach financial improvement. It not only gives me insight into my own practices, but it often gives me food for thought into areas I haven’t explored before.

Aside from specific frugality tactics, such blogs don’t really lead me to action. They mostly just make me think and entertain me while also giving me insight into topics that others are thinking about.

I completely ignore all short term changes in my investments. I truly don’t care what the stock market did today. I don’t want to know, because all that knowledge could possibly do is cause me to make a move that goes against the plans that I’ve researched and considered carefully over the years.

I don’t look for what the Dow Jones Industrial Average did today. I don’t look at what the S&P 500 did this week. I don’t want to know because that knowledge would just disrupt my plans. I don’t care because my investing plans are all long term and short term volatility has zero impact on what action I’m going to take. I don’t believe day-to-day changes are any sort of useful economic indicator, either. I just don’t see any value in it, so I don’t even bother to look. I don’t even look at the balance of my own investments very often.

I research specific things that come up in my own life. When I find myself bumping up against a specific problem in life, I tend to study that specific problem with a high intensity, grabbing books and articles that deal very specifically with that narrow issue I’m having.

For example, Sarah and I are considering adding an addition to our home (for a number of reasons) and we’re interested in how to do it in a way that minimizes our cost and adds to the value of our home, even if that means doing much of the work ourselves. While I have done a lot of small DIY projects, this is on a scale far beyond what I have done before, so I’m reading a lot about what would need to be done to do this properly, how much of it we can actually do ourselves, how we could serve as our own general contractors, and so on. (With topics like this, I tend to like to write at the junction of my own experience and what I’ve learned, so as we actually move into handling this project ourselves, I’ll likely be writing about it on here.)

Basically, when I find myself curious about an area in my life or want to take on a specific project or handle a particular problem, I seek out books and articles from well-regarded publications on that topic and rely on them to fill out my understanding.

I read financial magazines, but I usually get frustrated. Once a week or so, I spend several hours at the local library doing research for articles for The Simple Dollar or for other writing projects and for my own improvement as well. This usually means that I grab the latest issues of all of their publications that are even remotely related to financial topics, like Money Magazine and Kiplinger’s Personal Finance.

When I read those publications, I tend to skim more than anything. Many of the articles are on topics I find frustrating, as they often point people toward investing principles that I don’t fully agree with such as managing mutual funds and so on. The writing in those articles is often geared toward people who are successful in non-financial career paths and the writing tends to be very much in line with what appears in the advertisements of investment firms (to the point where I sometimes wonder if the articles are advertorials).

Mostly, what I’m looking for is a general sense of the kinds of topics that people are reading about and thinking about in general financial publications and I want to hit upon those topics. I generally don’t read financial publications like this for my own personal finance enrichment, as they tend to address financial problems and offer solutions that I’m not fully on board with, such as using a financial advisor or investing in managed mutual funds. They tend to also focus on issues that really only affect people that are very well off, with annual incomes in the high six figures or the low seven figures. I don’t have much interest in writing about having a third vacation home, and I don’t think you have much interest in reading about it, either.

Sometimes, there are really good articles in personal finance publications and I devour them, but more often than not the articles tend to address topics that are either not of interest to the vast majority of Americans or cover financial strategies that don’t match very well with my principles (which I’ll talk about below). So, I tend to browse and then move on.

I read long-form feature reporting on events, the kind that usually doesn’t pop up for a while after the event. I read magazines like The Economist, The New Yorker, The Atlantic, Science, Nature, and a bunch of others. About once a week, I go to the library, gather up a bunch of issues of different magazines (see above), and go through them, reading a bunch of the most interesting articles and taking notes as I read them. If I can find the articles online, I bookmark them using Pocket and read them later.

Online, I often visit Longreads.org for the same reason – long-form detailed reporting on a particular topic – and I do the same thing, bookmarking the interesting ones to read later on in Pocket.

When I have some spare time at home, I’ll pull up Pocket and read one of those articles, usually taking notes in Evernote if there’s something important or interesting that I want to remember or that I want to follow up on later. Sometimes, if something is really giving me a lot of food for thought, I’ll take some notes by hand, as I firmly believe that handwritten notes in my own words stick in my brain far better than anything else.

I read books. Lots of books. My main tool for learning about financial topics is books from the library. I tend to have several books checked out at any given time and I use two different local libraries on a regular basis.

Most of the time, I find myself intrigued by a particular topic, then I’ll seek out a few well-regarded books on that specific topic. Recently, I’ve been reading a ton about meditation; before that, I was reading a lot about cryptocurrencies; before that, I devoured several books on fermentation. I’m still devouring a lot of books on philosophy, too.

I tend to do my homework on the books that I choose to read (at least the nonfiction ones). Is the author well-regarded? Is there a bibliography in the back of the book (if it’s not a memoir)? Are the reviews of the book positive, especially from people in that field? A few minutes of Google searching usually tells me these things rather quickly. I tend to prefer books that have positive reviews even from people who don’t fully agree with the author’s take on the subject matter, or books that have won awards within a particular field.

I also tend to read anything and everything that’s reputable in the area of personal finance that comes in at the library. By “reputable,” I mean that I tend to avoid books with outsized promises on the cover (like promising that you can be a millionaire in a very brief period of time) and books from authors that have a reputation that I don’t trust.

What I try to find from most books are the core principles of the idea and the reasoning behind those principles. For example, if I’m reading a book on investing, I try to figure out what the author’s core investment principles and strategies are as well as why he or she finds those strategies worth following.

I find that books do an amazing job of digging into a specific topic with a depth and clarity that you really can’t find anywhere online. Nothing matches the depth and breadth of a well-written book on a particular topic.

When reading a nonfiction book, I tend to take a ton of notes, then reread those notes a few weeks later after finishing the book. This ends up locking a lot of the ideas from the book in my head, even if it does mean that the reading is slower.

In summary, I read
– independent personal finance blogs, because I enjoy personal stories and individual angles on principles;
– opinion pieces from sources I trust;
– financial publications, because I like to understand what people are reading when they often first seek financial advice;
– long-form journalism on financial topics, like cryptocurrency and the housing market;
– and books that cover specific topics of interest or new angles on financial principles.

I don’t read or watch
– current news reporting, because I don’t trust its accuracy;
– current opinions, because they’re usually based on current news reporting;
– nor financial indicators, because they don’t provide value into my investment practices.

I focus entirely on things from which I can learn because I trust the information being presented, things from which I can shape my opinions and views in a rigorous way, and things based upon those that lead directly to action. But how does that work in practice?

In general, I start with something I’m curious about. Maybe it’s a comment from a friend, or maybe it’s something I read about in a book on a different topic, or maybe I found an article on it in a publication that I read, or maybe it’s just something I noticed in the world or in my own life. How does cryptocurrency work? What does it take to become a history professor? How should I be saving for retirement as a risk-averse thirtysomething?

Once a topic is on my radar (and I usually have several topics that are on my mind at any given time), I read Wikipedia to get a general background and then I look for long-form articles about that topic. Usually, I have one main topic that I’m really focused on and I’m usually engrossed in a book on that specific topic until I feel like I have sufficient general understanding of it, then I move onto something else, usually one of the other topics I have an interest in at the moment.

In that process, I simply don’t pay attention to day-to-day news because, as I mentioned earlier, it’s often inaccurate (through no fault of the reporters – that’s just the nature of breaking news) and I’m not going to take any real action on it anyway. I’ll sometimes skim headlines just to have a sense of what people might talk about at a social event or on social media, but that’s about it.

So, in the end, I don’t feel a person has to pay any attention to financial news at all to be successful at mastering their finances; in fact, I consider a lot of it to be distracting noise. Read some personal finance books, figure out their core principles, stick to those principles, and look for very specific help on specific topics as they come up in your life. If you want inspiration and new angles on your principles, seek it in independent personal finance blogs with a human touch or memoirs related to financial topics.

Good luck!

The post Should a Person Pay Attention to Financial News? appeared first on The Simple Dollar.



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