Why you should never take investing tips from the front page

By Peter Dougherty

HAS anyone ever got good investment advice from the front page of a newspaper or magazine? Probably not.

Still, the media churns out endless headlines telling us where to put our money. Why? Because we love to read about markets and money – and secretly hope we might stumble across the golden tip that will make us rich.

Peter Dougherty: MBA in finance • MS in Spanish taxation • BS in economics • European Financial Planner in Spain • Chartered Retirement Planning Counselor® in U.S. • Author of two financial planning books

Part of the problem is that we want investing to be simple. The idea that the next big stock pick might be hiding in an article is seductive. Even Warren Buffet once said: “You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ.”

But the truth is investing is difficult.

For starters, we are competing with over 1.4 million professional fund managers and analysts in the US alone. Skimming a financial article doesn’t make us experts, any more than reading a menu makes us Michelin-star chefs.

Then there’s human behaviour. We are wired for survival, not investing. Evolution has left us with the ‘fight or flight’ instinct – great for escaping danger, terrible for financial markets. It’s why people panic when they see headlines like ‘Dow Jones falls 450 points’, even though that’s less than a one per cent drop.

At BISSAN Wealth Management, we know investing isn’t simple – but our approach can be. We tackle the panic-selling and impulse-buying bias in two ways:

1. Financial planning first. We start by mapping future needs – from retirement to property purchases – and park the money for these safely, out of market risk. The rest is invested long term.
   
2. Keeping cash ready. We deliberately hold back funds to invest only when markets fall. If the market drops 15%, we buy, safe in the knowledge that essential spending money is already protected.
   

It’s not perfect, but it works. As Buffet also said: “Knowing the limit of your competence is more important than being brilliant.”

Peter Dougherty is a Financial Planner at BISSAN Wealth Management in Spain. He holds an MBA in finance from Columbia University in New York and an MS in Spanish taxation (Máster en Fiscalidad y Tributación) from Nebrija University in Spain. He is certified as a European Financial Planner (EFP) in Spain and as a Chartered Retirement Planning Counselor® and Investment Adviser Representative in the United States. 

For more information:  https://www.financial-planning-in-spain.com

Click here to read more Business & Finance News from The Olive Press.