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Bad News Sells

Have you ever wondered why the news is so depressing? It's simple. Really!

Bad news sells! News editors and publishers know that fear is a more powerful emotion than greed. Greed sells, but fear sells a lot more.

Over the past 12 months, investors have been bombarded with a steady stream of discouraging economic and financial news. What are investors to do?

Some doom and gloomers recommended keeping money on the sidelines. Other advised to avoid the markets altogether. In either case, does this mean investors have to pay constant attention to their portfolios and make adjustments based on news events?

Anyone who's heard my investment philosophy knows that I do not espouse making adjustments to any investment portfolio based on recent news reporting. I suspect, however, based on all the buying and selling trends reported by mutual fund companies that most investors succumbed to the doom and gloom (i.e., the emotion of fear).

Weston Wellington of Dimensional Fund Advisors, in the article Another Wall of Worry, shared a small sampling of news excerpts that investors might have dwelled on over the past 12 months. Check it out.

Investors who followed the advice of the naysayers might be surprised to learn how well stock markets have actually done over the last 12 months. It is highly probable that these investors failed to achieve a market rate of return. Those who ignored the advice (most likely with the help of a Certified Financial Planner™ professional or financial coach), fared much better.

Let me close with a quote from Jim Parker, also of Dimensional, who wrote, "Maybe the best approach is to start reading the newspaper from the back page."

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