Too much news could affect your investments

Most people think that information is a good thing and more is better. While generally true, there comes a point when too much news can be harmful to your investment performance, unless it’s coming from me, of course.

Between numerous financial news outlets, both in print and on TV, there is no shortage of financial news. In fact, there is so much that it’s hard to sort out what is important, what is not, or if it is even true. I know some people who actually look at hundreds of headlines before most of us have even rolled out of bed. More information makes some people feel, well, more informed. But, is that true?

It might be for some professional traders or money managers, but I’m convinced that the average retail investor does worse with their investments the more they read the news. That should be troubling to you because there’s been no time in history when access to information has been greater, and while advancements in internet access and information availability have benefitted society in many ways, it hasn’t all been good. Overconsumption has become a big issue.

Think of it this way. You’ve heard the saying, “The dose makes the poison.” It basically means that anything can be a poison if consumed in large enough quantities—alcohol, chocolate, coffee. A little is nice, but too much is poisonous. This might be especially true of political news lately, or even social media.

The same goes for investment information, which is why I’m recommending today that you immediately stop reading the news! Okay, I’m kidding to a certain extent, but too much is counterproductive. Another favorite phrase in the investment world is, “paralysis of analysis.” This has also been called, “narcotizing dysfunction.” Too much information, especially conflicting information, causes people to freeze and not make a decision. No decision is sometimes the worst one of all.

Having access to more information is not the same thing as knowing the best thing to do with that information. In fact, in many instances, having more information can make decisions and actions more difficult. We either can’t separate the important information from the noise, or we’re exposed to too many views and alternatives, making it tough to choose which is best or even right.

Many times, I have talked about how Warren Buffett’s greatest strength is discipline, not genius. He and other successful money managers maintain discipline in their strategies, largely by ignoring the news.

You might liken the 24/7 news cycle to the temptation motorists feel in the need to “gawk” at car accidents on the interstate. Like the accident, it might be best to glance at the news because it takes too much effort to fight the urge to gawk, but then quickly turn the focus back to the road ahead.

I’m not suggesting you stop reading the news completely. That’d be a little extreme. At the end of the day, I know you’re still going to read the news. I will, too, but do yourself a favor and limit your consumption, take most of it with a grain of salt, and don’t look to the news for your next “hot” investment recommendation. Develop an investment plan and stick to it unless there is an overwhelming reason to change.