Financial Media Is Not Your Friend

I’m certain you were well aware of markets losing approx 15% last month, as media headlines such as “Markets in Meltdown” became very loud, and exaggerated. When markets rebounded in last few weeks of the month did you see an equal amount of media attention? No, you didn’t even get 10% of the media attention on the rebound.

The greatest insight for me in April was a reminder that the media is no friend to you and your financial plan, because they want you to be fearful. The more fearful you are, the more likely you are to read their articles which makes them money. They are selling fear. I’m reminded of a newsroom saying. “If it bleeds, it leads”  This is why most investors perform poorly, selling low and buying high.

If you look at the table below, it shows the:

• Drawdowns per year (DD) This is the fall investors had to endure each year.

• Total Return (TR) at end of year.

The drawdown we experienced in April is very much a feature of the market and not a bug. It is a great learning to observe the attention given to the downward moves in the market during April versus the almost even upward rebound, and understand that the media are operating with their own motivation. 14% drawdowns are the average you would expect to endure in markets in any year.

Of course, a rebound in the markets doesn’t mean that the volatility is over, but we don’t need to view a 15% drawdown as a market meltdown either. Perspective and balance is crucial.