Media plays a huge role in the decisions we make on a daily basis. From digital news sites to social media, you can hardly escape its influence. But is ‘financial porn’ affecting your decisions and financial security?
Sensationalist news has become commonplace; it’s evident with just a glance of the headlines in the morning’s newspapers. And the financial industry hasn’t escaped either. It seems you’re bombarded with claims of ‘funds to invest in now’ or ‘stocks plummeting’ on a daily basis. Clickbait headlines are designed to draw you in.
Of course, newspapers and news stations are governed by legalities. They would face hefty fines and backlash if what they printed were unfounded. However, often they show just a snapshot of a story. After all, it’s difficult to go through all the ins and outs of the stock market in just a few column inches. A headline proclaiming a ‘stock market CRASH’ is unlikely to look more in-depth at what’s caused the crash, long-term trends, and how the average investor should respond.
As a result, basing financial decisions on the news is unwise, you’d be acting on just a portion of the information.
When you look beyond the traditional news outlets, it gets even worse. How often have you come across a blog or social media post from an ‘expert’ offering advice? There are sites that can be invaluable when you’re searching for some guidance but often it’s unclear what credentials the authors have. As with many things published online, information from unreliable sites can be biased and misinformed, not to mention the risk of potential scams.
It’s clear that basing financial decisions on what you see in the media can be risky, but it does happen.
But how does this have an affect your decisions? Even if you haven’t consciously realised that media coverage has changed the way you view money, it probably has to some degree.
Perhaps after reading about some share prices falling, you were tempted to move some of your money out of investments. Or maybe after reading about those that have made a fortune investing in Bitcoin, you considered taking a greater level of risk in the hope of profiting.
If you’re not convinced by the influence media can have, Tesla is the perfect example. Back in August, the electric car company saw stock prices leap. In a single day, Tesla stock climbed 11%, reaching $379.57. What sparked it? A tweet from CEO Elon Musk stating: ‘Am considering taking Tesla private at $420. Funding secured.’ It’s a deal that never materialised yet many took financial action based on that single tweet.
The sensationalist nature of the media can lead to people making rash, impulsive decisions based on limited information. And, if it doesn’t pan out, those that disseminated the information are unlikely to be held accountable. If a newspaper article declares a fund is worth investing in because if you’d invested ten years ago, you’d have received a return of 12%, you won’t be compensated if you take the advice and lose money, for example.
Even when media advice proves right for one person, it doesn’t necessarily mean that it will work for you. There’s no one-size-fits-all strategy when it comes to personal finance. This is one of the crucial elements that’s missing from picking up advice from media outlets and other sources.
What’s the solution? Financial planning
Financial planning looks at the steps that would be appropriate in your personal circumstances in the context of your goals. It’s a service that can add value and help give you peace of mind. You’ll be able to understand how your finances will be affected by different scenarios.
When looking at investments, for example, you can weigh up how different levels of risk can affect potential growth. If you’re considering a high-risk strategy, financial planning will be able to demonstrate what may happen, ranging from best to worst case scenarios. It’s a process that can help you understand how the decisions you make can have an impact.
But financial planning isn’t just about the end figures. It puts you at the centre of a financial plan and aims to create a strategy that allows you to achieve your aspirations. Your goals should have a huge influence on the financial decisions you make, after all, that’s what you’ve been working and saving for. A goal of retiring on a comfortable income at 55 will need a very different strategy to someone that wants to provide financial support to children in a few years’ time. A financial plan helps you put your finances in perspective.
To better understand your finances and the action you should be taking, please contact us today. We’ll use our skills to create a strategy with you in mind.