Writing original content about prudent investing is difficult. It’s how I imagine the customer service representative at Weight Watchers feels. Did you add up your points? Is it less than you were allotted? Well then just keep doing it and it will work. As with nutrition, we all know that a well-balanced diet coupled with exercise is a key to staying healthy. But it’s not knowing what to do that is the problem, it’s doing it. The problem with making the right choice everyday is that it’s not sustainable. Everything is okay in moderation, but that includes moderation. Sometimes after you’ve had a long day at work (or you drank too much because the Blues won the Stanley Cup), you’re heading home, and wouldn’t you know it, there’s a McDonald’s staring at you every four blocks (full disclosure, with two children under 8, I am a monthly active user of MCD).
Financial journalism (CNBC, Bloomberg, Barron’s) is the McDonald’s of investing. It’s delivered hot and quickly, it’s easy, it tastes good, and you don’t have to think. The junk is fed to you through so many mediums that it’s almost impossible to ignore. But, inevitably when laziness takes over and the noise starts to creep in, I try to go back and read a piece from the Wall Street Journal, first published in 2013 by the great Jason Zweig. I’ll pick out a couple paragraphs, but I would urge you to read the entire article. Maybe it will help at least one person turn down the volume and forego the investing flavor of the month (the Blizzard of the Month is Brownie Dough, by the way).
I was once asked, at a journalism conference, how I defined my job. I said: My job is to write the exact same thing between 50 and 100 times a year in such a way that neither my editors nor my readers will ever think I am repeating myself.
That’s because good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.
The advice that sounds the best in the short run is always the most dangerous in the long run. Everyone wants the secret, the key, the roadmap to the primrose path that leads to El Dorado: the magical low-risk, high-return investment that can double your money in no time. Everyone wants to chase the returns of whatever has been hottest and to shun whatever has gone cold. Most financial journalism, like most of Wall Street itself, is dedicated to a basic principle of marketing: When the ducks quack, feed ‘em.
In practice, for most of the media, that requires telling people to buy Internet stocks in 1999 and early 2000; explaining, in 2005 and 2006, how to “flip” houses; in 2008 and 2009, it meant telling people to dump their stocks and even to buy “leveraged inverse” exchange-traded funds that made explosively risky bets against stocks; and ever since 2008, it has meant touting bonds and the “safety trade” like high-dividend-paying stocks and so-called minimum-volatility stocks.
It’s no wonder that, as brilliant research by the psychologist Paul Andreassen showed many years ago, people who receive frequent news updates on their investments earn lower returns than those who get no news. It’s also no wonder that the media has ignored those findings. Not many people care to admit that they spend their careers being part of the problem instead of trying to be part of the solution.
My job, as I see it, is to learn from other people’s mistakes and from my own. Above all, it means trying to save people from themselves. As the founder of security analysis, Benjamin Graham, wrote in The Intelligent Investor in 1949: “The investor’s chief problem – and even his worst enemy – is likely to be himself.”