Content provided by Jackson Lee, CFA, Quantitative Investment Research Analyst
Over the past couple of decades, advancements in technology have made a positive impact on the investment industry. For average investors, one of the biggest benefits is the availability and accessibility of data and information. Thanks to the advent of mobile devices, investors now have access to a constant stream of financial news anywhere and at any time. While being informed is a good thing, investors need to be wary about what they read and how they react to news headlines. As history has taught us, overreactions to market noise can be detrimental to returns, and we don’t have to look far for examples. The chart below from Bespoke Investment Group shows there were plenty of events in 2017 that could have spooked investors, prompting them to exit the marketplace and miss the year’s strong finish.
There are plenty of reasons news often does not translate into actionable trades. Media companies, including financial news, are in the business of entertainment. Their target audiences vary and news coverage usually focuses on what interests those audiences today. However, as investors, we have unique investment objectives, and it’s extremely rare to find news that is relevant to individual circumstances and time horizons. Even in those cases, the market would likely have already priced in the news before an average investor could take any action.
So, what should investors read?
In my opinion, the “Reading Spectrum” below from Safal Niveshak’s blog nails it:
In short, avoid the noise that arises from market speculations and spend more time reading articles and books that are unbiased and relevant in the long-term. This includes gaining knowledge in fields outside of finance as investing is more than just numbers and theories.
This insight is why the investment team at CLS introduced “The Reading Hour” a couple years ago, allowing and encouraging every person on the team to carve out an hour each day to read. The content of the readings can be on any subject, and there are no questions asked. In addition, a “CLS Library” was created for employees to check out books free of charge. As Warren Buffett once said when asked how people can get smarter, he held up stacks of paper and said, “Read 500 pages like this every week. That’s how knowledge builds up, like compound interest.”