Wes Moss: Dangers of too much financial information

Wes_Moss-for-Web-smaller-fiCertified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

America has a diet problem. We consume too much junk, don’t exercise enough and seem to have lost our will to do the hard work necessary to get in shape and meet our goals. Another lecture on our national obesity problem? Oh, no. I’m talking about personal finance.

In this age of information abundance, we are offered a never ending buffet of financial news, advice, opinion and fear-mongering from an endless line of caterers – the Wall Street Journal, CNBC, Yahoo Finance, Fox Business News, Google Finance, MarketWatch, Jim Cramer, Suze Orman, Dave Ramsey. The heaping platter is constantly being passed on radio, TV, the Internet, bookstores, our mailboxes – everywhere! It’s all carefully prepared and portioned to go down nice and easy. While most of this information has nutritional value, a lot of it is mental junk food that will hurt your bottom line. And, as your Mom told you, even too much of a good thing – in this case a 24/7 infusion of money news and advice – can be a bad thing.

This info bombardment has two consequences. First, some people get so overwhelmed by the conflicting information and advice that they are unable to craft a personal investment strategy. Second, much of this go-go reporting focuses on big deals and big scores – mergers, IPOs, etc. – where someone is making a quick killing. This, accompanied by non-stop ads for supposedly sure-fire investment programs, has contributed to a national case of Investment Attention Deficit Disorder, which undermines the critical thinking and patience necessary for successful long-term investing.

Is this really affecting investors? YES. Over the past five decades, the length of time investors have actually held stocks has plummeted. During the 1960s we held a stock an average of seven years. By 2007, we were holding on for barely eight months! Meanwhile we are spending millions on seminars, DVDs and software programs that offer the promise of wealth and security “whether the market is up or down” or even if our currency collapses. Too many people seem to have stopped thinking for themselves. We’ve forgotten the irrefutable wisdom that slow and steady wins the money race.

The best way to retire wealthy is to inherit $100 million from a long-lost relative. The second best way is to carefully amass a portfolio of high quality investments and hold them for a long time. Yes, you need to follow the financial news, and, yes, you will occasionally tweak your holdings based on developments. But you should never throw it all up in the air because some guy on TV is banging a bell and raving about the opportunity/crisis du jour. I guess what I’m saying is, pick your sources of information as carefully as you pick your investments.

Something rather boring that should work over the long haul? The very inexpensive Vanguard Dividend Appreciation ETF (VIG). At less than ¼ of 1% per year in management expenses, this exchange-traded fund (much like an index fund), holds approximately 140 large global companies that have long-term track records of increasing dividends over time.

—By Wes Moss, for the Atlanta Bargain Hunter

2 comments Add your comment

JJenkins

January 31st, 2011
12:39 pm

Last year, during the European mess, I sold my 401K thinking that I was going to pay more attention to my investments. By the time I bought back in in August, I thought htings were better….which now it seems like they were. Problem is, my wife had a 15% return last year and I only had a 3%. In 2008, I screwed up by not doing anything and then last year I screwed up for paying attention…….I can’t seem to strike it right…..

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