We are bombarded with information from countless sources. There is far more data available than we could ever hope to process, which makes one skill increasingly important: deciding what deserves our attention.

Our brains naturally use mental shortcuts to sort through information and determine what matters. But when it comes to investing, the information we choose to consume can influence our emotions, expectations, and ultimately our decisions.

The Financial Media

Many investors turn to financial media to stay informed. The challenge is that financial news naturally focuses on what is happening right now: today’s market move, the latest economic report, a concerning forecast, or the newest potential crisis.

That information may be interesting, but it isn't always useful.

This is especially true when markets decline. Negative information captures our attention and can make losses seem more significant and permanent than they really are. The natural response may be to protect ourselves by selling.

Yet lower prices aren't necessarily bad for long-term investors. They allow new investments to be made at lower prices and dividends to be reinvested more favorably. Market declines are uncomfortable, but they are also a normal part of investing.

Information vs. Perspective

Good investment decisions require more than information. They require perspective.

There will be periods of poor performance. There will be recessions, uncertainty, alarming forecasts, and unexpected events. We cannot predict exactly when they will occur, but we know they will occur. That is why uncertainty and market declines are accounted for when we build a financial plan and construct an investment portfolio.

The important question isn't simply, “What is happening?”

It's “Does what is happening require a change to my financial plan?”

Often, the answer is no.

Just because information is available doesn't mean consuming more of it will help you make a better decision. Financial media companies have an incentive to keep your attention. My incentive is different: to help you make thoughtful decisions consistent with your goals and financial plan.

When the headlines become concerning or the markets become uncomfortable, bring those concerns to me. We can separate information that matters from information that is simply noise and make decisions based on your plan rather than the story of the day.

© Behavioral Advisor Academy