What happens when you read one of the following words in the headline of a finance article?
At the very least they cause worry. Which can lead to fear. And in the worst case – panic.
One of the most famous quotes from probably the greatest investor of all times is:
“Be fearful when others are greedy, and greedy when others are fearful” – Warren Buffett
But that’s easy for Warren to say. He’s incredibly smart. He’s incredibly patient. He knows it is right. He can keep his nerve and stick with his strategy. The average investor? Now that’s a different story.
When markets are calm, we know what we should do. Over the long term markets rise. When there is a correction or a bear market, we’ll buy because we’ll look back on it as a great buying opportunity. But then the market drops 10% or 15% or 20%. The headlines tell us it could get worse. And we start to worry, become fearful and panic.
Panic can lead to selling, at just the wrong time. Market falls and corrections are a normal part of the cycle. A market crash is coming. You can be sure of that. It’s just that no one knows when. Have a strategy to deal with it whenever it happens.
The problem with news is that it is skewed to the negative. Why? Negative headlines have a click through rate a massive 63% higher than positive headlines. Bad news sells.
So what can we do to avoid this next time it happens?
Avoid the news. Don’t read the daily financial pages.
I love reading research, studies, reports and listening to podcasts. But daily market news – no thanks.