The Negativity Narrative: Financial Media Doesn’t Make Money on Good News

19 Apr The Negativity Narrative: Financial Media Doesn’t Make Money on Good News

Like it or not, the media plays a significant role in our society. It communicates important news and relevant stories, but the main goal of journalism is not to inform. Instead, it focuses on capturing attention, entertaining, and ultimately bringing in advertising revenue. 

Financial journalism is no different from all other journalism; it operates on the principle that bad news is good for their business.  

When it comes to your financial plan, it’s essential to learn how to cut through the noise. Trusted, unbiased sources of financial information that have skin in the game will always be a better use of your valuable time. 

Financial Media ≠ Financial Advice

Even when things are going well, flipping through news stations can make it feel like the sky is falling. Since the goal is to sell advertisement slots, they need people to tune in and consume endless content. They aren’t responsible for your actions after listening or reading, and they don’t know your financial situation, which is required to give financial advice.

The CNBC’s of the world have gamified the stock market. They display bright red and green colors with ticker symbols rolling across the bottom like football scores on ESPN. Financial TV personalities have to present some form of call-to-action because it’s their job, and the vast majority of ‘advice’ on TV is counterintuitive to you. If market pundits got on TV and told you to do nothing and be patient, the network wouldn’t keep them around for very long. 

Also, when you see big, scary numbers in a news story, be aware of denominator blindness, which is the failure of putting large numbers in context. 

For example, if a headline states, “Dow Jones falls 500 points”, you may be tempted to sell because they’re painting the picture of a potential crash. However, what’s not shown is the current level of the Dow and how insignificant 500 points can be. The Dow trading at 35,000 in 2022 is much different than, say, 15,000 – where a 500 point drop would be a much bigger deal. Remember, numbers must be in context to get the whole perspective.

Real financial advisors aren’t tuning in to Fox News or CNBC to make investment decisions, so you probably shouldn’t be either. There are more effective, accurate ways to make financial decisions – such as evidence-based investing and matching your portfolio with your goals. 

A Better Approach

The news and their market “experts” don’t know your situation, and they definitely can’t predict the future. Instead, focus on the things that are within your control. These are a few things to keep in mind:

Your savings rate

Your contribution rate and asset allocation matter MUCH more than security selection (stock picking) in the long run. A general rule of thumb is to aim for a 20% savings rate. You can find this number by dividing your monthly income by five. A trusted advisor helps you create an accumulation plan and know what asset classes get you to your goal.

Remind yourself why you’re investing

Defining your “why” is essential to making informed investment decisions because it serves as your North Star. Each decision can be traced back to the underlying goal. For example, why do you own a particular stock or invest in a specific asset class? It will potentially reduce your work hours, help buy that vacation home, send your daughter to grad school, or provide the retirement you desire. 

Remember that you’re buying ownership of companies, not tickers on screens.

Markets don’t drive your whole financial plan

Investments are one piece of your overall plan. The media loves to talk about investing because it’s the flashiest topic to debate. But other areas of finance are also impactful and are much more controllable. Some things that the news won’t remind you of:  

• The importance of minimizing taxes through proper planning like asset location optimization and tax-loss harvesting
• Why it’s crucial to have an estate plan in place
• Managing monthly cash flow
• Evaluating and obtaining the proper insurance

How to Stay in The Know

We know there’s a problem with financial media, but what are the other options? One, we read a lot, so you don’t have to. Part of our job is to stay informed about financial news and economic trends. We take in the information, filter through it, and provide you with the things that matter. We understand that trying to sift through various sites and stories to get the information you need is challenging, so we create several pieces of original content each month, including:

• The Family CFO blog
• Leader’s Way to Wealth video series
• The HCO Newsletter
• Flash alerts during significant market events

While you should diversify your content intake to create perspective, our insights help keep you informed – with research and data.

The Takeaway

Financial news and journalism are primarily meant to entertain, not inform. If you’re looking for a reason to sell, you can find one on the news. Learn to cut through the noise, be aware of the motives, and understand that financial advice is a personal experience, not a reaction to economic happenings. The media doesn’t know your risk tolerance, goals, time horizon, current investments, or stage of life. A trusted advisor can help you create a financial plan that prioritizes your goals and values, which will help you make financial decisions in your best interest.