Investing Caffeine

Information Choking Your Money & Mood to Misery

July 13, 2013 at 7:21 pm Leave a comment

Source: Photobucket

On a daily basis, I make my way into the office before the market opening bell, preparing myself to gorge on a massive heaping of news stories and headlines. But scarfing down tons of tweets and hundreds of headlines is not enough. Magazines, newspapers, conference calls, blogs, presentations, conferences, interviews, television clips, and software lists are but just a few additional aspects to my steady diet of information. Like shopping down each and every aisle of the grocery store, an annoying tendency I admittedly commit, there are plenty of healthy and unhealthy items to choose from. The key is identifying the items that are the best for your financial health. After carrying out this gluttonous information-stuffing business for more than twenty years, I’ve gotten much better at separating the data wheat from information chaff. This is critical in avoiding heartburn for my Sidoxia clients and me.

One might ask, “What harmless headline or innocent anecdote could possibly cause harmful financial indigestion?” I don’t know about you, but in recent months, gobbling down these following headlines without discretion can lead to a serious case of acid reflux:

• “Stocks Tumble as Bernanke Discusses Tapering” – USA Today
• “China’s Economy is Freezing Up. How Freaked Out Should We Be?” – Washington Post 
• ” ‘Suffocating in the Streets’: Chemical Weapons Attack Reported in Syria” – NBC News
• “Europe’s Zombie Banks – Blight of the Living Dead” – The Economist
  
• “Threats from Extremists as Egypt Slides into Turmoil” – The Times
  
• “Japan Market Plunge Sparks Global Sell-Off” – Los Angeles Times

I think you get the idea. No wonder investors collectively are acting like a deer in headlights, resulting in declining stock market participation – a 15-year low (see Investing Caffeine’s DMV Economy)

In the world of competitive eating, the execution of improper consumption technique can lead to a so-called “reversal of fortune,” as can be experienced by the last video on my Investing Caffeine article, Baseball and Hot Dogs. Disciplined processes are needed to prevent such an event when devouring excessive amounts of information. This is a timely topic as Joey Chestnut recently set a new world record by eating 69 hot dogs in 10 minutes.

While digesting the avalanche of daily data is quite complex, understanding the harmful consequences of doing so is quite simple. Carl Richards, a contributor writer to the The New York Times and Morningstar Advisor does a great job of outlining the detrimental impact of information consumption on investors’ wealth and happiness through minimalist charts found at BehaviorGap.com.

Here is my co-mingled version of Richards’ work:

As Mark Twain said, “If you don’t read the newspaper, you are uninformed. If you do read the newspaper, you are misinformed.”  It’s perfectly fine to remain current with major economic, political, and worldly events, but the consequences to overreacting to the ever-changing news flow can be disastrous to your financial and personal well-being.  Managing your life savings can be stressful and if not managed correctly will damage your financial goals.

If you do not have the time, interest, or self-control to digest the massive buffet of endless information, do yourself a favor and find an experienced and trusted advisor that can assist you with the Heimlich maneuver, so you don’t choke on the infinite amount of data.

See also (Investing Caffeine: Age of Information Overload)

www.Sidoxia.com

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients hold positions in certain exchange traded funds (ETFs) and CMCSA, but at the time of publishing, SCM had no direct position in GCI, WPO, NYT, MORN or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC Contact page.

Entry filed under: Behavioral Finance, Education. Tags: Behavior Gap, Carl Richards, information overload, investment planning, market volatility, media headlines.