Two pieces of journalism - one hilarious, one deadly serious - came across my line of vision recently. In their own way these articles are joined at the hip. Here’s why.
"HatTip" is written by Nick Lincoln, IFA
The first piece was from satirical website The Onion.
As the best satire can, in one fell swoop, it captured the modern media news cycle. And skewered it. Direct hit!
You can see the headline in the shot below. It’s wit of the highest order (by my reckoning at least, which may not count for much).
The story itself is worth a scan. But the piece itself works alone as that headline. Quite brilliant.
The other more sober piece was from Dalbar Inc. Most assuredly, this is not a barrel of laughs. Although it is very instructive.
As it has done for decades now, Dalbar researches US investment funds across the board, to monitor the gap between what the funds return, and what the investors in these funds return. That’s not an intuitive sentence perhaps, so please read it again if unsure.
And what did Dalbar find of US investors in 2018. This, sadly:
A combination of volatile market conditions and bad timing caused the average U.S. investor to lose twice as much as the S&P 500 in 2018, according to a new study from DALBAR.
The S&P 500 is, effectively, the American stock market. It fell by 4.38% last year. However the average US equity investor lost nearly 10%. Again, it may pay you to read that sentence again, slowly.
To be clear: by doing nothing but standing and looking out of the window, an investor in the S&P 500 lost less than half the money an active investor - pulled this way and that by the relentless media news cycle - lost.
The Onion’s point is deadly serious: news ain’t about helping you
For the avoidance of doubt, numerous Dalbar studies over time have shown that this phenomenon works in reverse. When markets are rising - which they do, most of the time - the investor who constantly reacts to the news cycle woefully underperforms the broad market investor, who acts only in accordance with her financial plan.
Today, the Fourth Estate’s role is to get eyeballs looking at links. And then to get clicks on those links. The media is not there to help you in any meaningful way. Certainly not when it comes to your personal financial situation, and any related investments you may hold.
Your financial plan dictates the appropriate portfolio you need to own. Your portfolio changes only as your financial plan (eg goals, aspirations, life events etc) changes.
the onion’s satire is funny. it’s also deadly serious. take onboard the lesson - or become the punchline!
{The above is not specific financial advice aligned to your unique circumstances and requirements. If you act on this article without first reading your own body weight in Key Features Documents, personal illustrations and fund fact-sheets then you may well be struck down by lightning.}
© 2019 Nick Lincoln
