How to ignore investment “noise” in the information age, and why it matters

Warren Buffett, the respected American business magnate and investor, once said: “Investing is simple, but not easy”.

This wisdom highlights that investing, at its core, remains straightforward. However, to “master” investing, you typically need to display foresight, discipline, confidence, and knowledge.

Sadly, these traits can be difficult to adopt in the information age. Unlike any other generation before us, we now have access to 24/7 news coverage, which can be understandably overwhelming for many people.

As a result, you could be making investment choices based on what you read and watch, rather than the advice of an experienced professional.

Thankfully, there are ways you can more easily tune out the noise and focus on the long-term rewards of investing. Keep reading to find out why ignoring media noise could help you nurture your long-term financial goals.

Media noise can prompt investors to panic-sell assets

Stock market “noise” can be described as daily short-term information from media outlets that may not always be relevant to your investing strategy.

Even though these insights can sometimes offer a glimpse into historical market behaviour, it’s important to remember that any future predictions are just speculation.

Plus, the financial media presents a generalised overview of global circumstances that doesn’t take your personal situation into account.

Nevertheless, negative news stories can understandably spark panic, sometimes causing investors to crystallise losses by selling shares after their values dip.

One example of this psychology in action is the Covid-19 pandemic. According to Magnify Money, 42% of investors sold stock at the beginning of the pandemic, just as share values began to decrease whilst economic fears spread.

The study then reveals that 88% of those who did sell said they regretted it later; many indices made recoveries after March 2020, but those who panic-sold holdings are yet to recuperate those losses.

This instance illustrates the importance of staying calm, even when the value of your investments falls temporarily.

Ultimately, tuning out media noise and staying true to your long-term investment plans could help you avoid giving in to the temptation of panic-selling.

Investment “bubbles” can prompt over-excitement in eager investors

More positively, investing your wealth can be an exciting endeavour that makes you feel confident about your future.

However, the age of social media and 24/7 news cycle has meant that investment “bubbles”, in which stock prices are inflated beyond their realistic value by excitable investors, are increasingly prevalent.

One recent example which demonstrates how the media can help create bubbles is GameStop.

In January 2021, retail investors on the social media platform Reddit collectively built up the price of shares in GameStop, an American video game retailer with falling revenues.

This coordination from social media users resulted in the purchasing of the company’s shares en masse, sending share prices from around $3 to almost $500 at their peak, Google Finance reports.

Whilst a handful of lucky investors made millions of dollars almost overnight, the bubble soon burst, leaving many GameStop investors with serious losses and no way to regain them.

Although an extreme example, the rise and fall of GameStop share prices over a few short months shows just how important it is to consider your long-term goals before jumping onto a trend.

If you are interested in pursuing new investments because of something you’ve read about online, it could be prudent to chat to your Financial Planner before proceeding.

Historical data shows that time in the market can be more lucrative than timing the market

Whilst reacting emotionally to short-term market events and media noise is natural, historical data reveals that staying invested through volatility could help you see the returns you desire.

Indeed, a study from Nutmeg highlights how long-term investing has helped investors grow their wealth in the past. The study reveals that:

• If you invested your money on a random day between January 1971 and July 2022, and held it for 24 hours, your chances of positive gains would be 52.4%.
• Meanwhile, if you held this same investment for a quarter, your chance of positive returns would rise to 65.6%.
• Keep the investment for a year, and the chance of returns reached 70%.
• Hold it for 10 years, and this would increase even further to 94.2%.

Of course, it’s important to remember the value of your investments can rise and fall.

All in all, whilst it’s tempting to sell up when things go downhill, or to buy up shares when a stock price becomes temporarily inflated, these actions could go against your strategy for the coming years.

Most importantly, time in the market has historically been more effective for growth than timing the market, so maintaining a stoic investment approach could help you achieve your goals over time.

Work with a Financial Planner if you’re still unsure of how to tune out the noise

If you find yourself somewhat overwhelmed by noise from the media and are struggling to navigate the emotional aspect of investing, perhaps the best way to avoid this is to speak with a Financial Planner.

In fact, a Financial Planner can assess your:

• Tolerance and attitude to risk
• Long-term financial objectives
• Capacity to accept volatility.

Using this information, we can then offer bespoke advice about creating a portfolio that matches your appetite for risk, investing time frame, and growth targets.

Get in touch

Tuning out the noise can often be easier said than done, but we can help you ignore the static and focus on your long-term investing strategy.

Email us at enquiries@pen-life.co.uk, or call 01904 661140 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

All information is correct at the time of writing and is subject to change in the future.