Resist Progress at Your Own Peril

Ask most people who watch TV and cable news if they think the world is safer now than it was 30 years ago, and they’ll tell you no. Are they resisting progress? But if we look at the data, it’s clear that in most parts of the world — and certainly in America — we’re safer now than we were in the past. The problem is that we have more and more access to hearing about the bad stuff. 30 years ago, if something terrible happened across the country, you might never have known about it. But today, we live in a world of 24/7 news cycles. There are more media reporting on more stories for more periods of time. It’s not that bad stuff happens more. It’s just that you hear more about it than you ever did in the past.

Dealing with Negativity Around Financial Markets

The media is always looking to sensationalize stories and trigger the emotions of their audience. That’s how they keep people engaged (and sell advertising.) If you pay attention to the media, you’ll start noticing that doom-and-gloom headlines tend to dominate the news. The press continually make forecasts about what the markets will do next –and those forecasts are almost always ominous (and wrong.) Why? They get more viewers that way. When they’re wrong in their predictions, there’s no one to hold them accountable for the fact that they got it wrong. And when they’re right, they have a field day hyping up the negativity. This is the reality of the world investors need to navigate. One of the best investing skills you can develop is the ability to tune out the news and talking heads and to ignore all the media hype.

The Consequences of Resisting Progress

There’s real danger in letting the media scare you away from investing or opting to hoard your money in cash. It might feel like the safe bet today. But you still face serious risks when you refuse to move money into more than just cash.

One of the biggest? Inflation.

If you keep all of your money in cash, you will lose purchasing power. That dollar that is earmarked for retirement will buy fewer goods every year as inflation strips the value away from your cash. There are real risks in investing haphazardly or without a plan. You increase your risk every time you act emotionally, fail to diversify, forget to rebalance to keep the right asset allocation, or simply invest in places that don’t align with your needs or goals. But “playing it safe” is a risk too. And you’re far more likely to fail to reach your goals if you don’t take appropriate, measured risks inherent in investing strategically.

The Real Risk Is Staying Scared, Not Staying Invested

Think about it for a moment: how many times has the media predicted we’re all headed for a massive crash that we might not be able to recover from? How many times have we heard that we’re driving straight for a cliff and investors in the market will lose it all? Now think about how many times either A. nothing happened or B. we experienced a market downturn… followed by a recovery. There’s no denying that it is painful and difficult to live through a tough economic period. The Great Recession hurt many, many families. But if you stayed invested in the market, that pain was temporary, and you wouldn’t have lost anything if you didn’t sell. In fact, you would have dramatically increased your wealth by staying invested and riding the market all the way up to new record highs. The next time you’re tempted to tune into the media hype and react to what you hear on the news, take a step back. Set your emotions aside. Stay the course. If all else fails, call your financial planner to talk through what’s on your mind or how you feel.