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Dangers of Information Overload

Dangers of Information Overload

Decades into the information age, have we hit peak screens? Everywhere you look, people are offering advice. Investing “tips”, stock “insights”, and promises of “financial security” abound across social media and TV.

Jim Cramer, who hosts a weekly show on CNBC, has become a loud symbol of this trend. A former hedge fund manager who co-founded TheStreet.com, Cramer is an often-divisive figure who, it’s fair to say, enjoys the limelight. His bio describes him as “your personal guide through the confusing jungle of Wall Street” who just wants to “help you make money”. Sounds good, let me rearrange my portfolio. But wait, the description goes on. He’s painted as a “TV personality” as well as a money manager, his opinions are “fiery” and the show’s called “Mad Money”. On second thoughts … call me old fashioned, but I don’t want a hot head telling me where to put my retirement savings.

This is the challenge for the modern-day investor. The lines have been blurred between serious advice and media soundbites, and it’s easy to be tempted by the latter. TV and Twitter, for example, are awash with messages and arguments that are the anti-thesis of careful long-term financial planning, which is designed to enable clients to live the retirement they desire.

And just because a man talks up a stock on your TV screen, it doesn’t mean he’s right. The Twitter handle @AlgodTrading claims he doubled the money in his “inverse Jim Cramer account”, pointedly saying it’s “honestly mind-blowing how wrong one man can be”. He posted the numbers. It looked legit. But if your investment advice is a contest between @AlgodTrading and Jim Cramer, you’re probably looking in the wrong place.

Your Financial Advisor can help you plot the path forward towards a fulfilling retirement but, given the tsunami of opinions out there, it’s easy to be knocked off course. Nowhere plays on the get-rich-quick temptation greater than social media – and there is a growing number of people willing to tell you how to manage your money in exchange for a “like” or a “follow”.

Don’t be swayed by “finfluencers”

A relatively new breed, financial influencers – or “finfluencers”- are typically social media users with big followings who use entertaining marketing videos or posts to impart financial advice. This could be framed as primers on how to save for retirement, or tips on making money from the stock market. Their presence – and influence – has caught the attention of the North American Securities Administrators’ Association (NASAA), which has issued an Informed Investor Advisory to educate people on what to do when encountering financial advice on social media.

For investors, listening to these pseudo advisors is like going on WebMD to diagnose your ailment: it’s dangerous, stressful, and more often than not, wrong. Advice that is suitable for one person can be disastrous for another – and an anonymous avatar on Twitter, with no credentials, knows nothing about your personal situation. But even if the person is a certified financial planner, they still don’t know your personal circumstances. That’s why building a relationship with a finance professional you trust IRL (in real life, for those not familiar with the lingo) is so important.

Your Financial Advisor is recognized by the Financial Planners Standards Council (FP Canada) and a Portfolio Manager registered with a provincial securities commission. If this is still not enough to steer you away from “finfluencers”, invest small and check whether they are paid by a company who might be swaying their recommendations. Remember, there’s no free lunch in investing.

Beware experts and market predictors

Every talking head has an opinion. Have you ever gone back and revisited their forecasts? Sure, some get it right but just as many get it wrong. It’s important to remember that good retirement investment planning does not require you to watch the markets daily or set your alarm for the 4pm verdict from the CIO at Goldman Sachs. The combination of your Financial Advisor and our Associate Portfolio Manager will help you craft your plan, update it when your life changes, and make sure you stick to it. Yet, 24-hour coverage of the financial markets is obsessed by constant analysis, stock picks of the day, and tips on how to change your portfolio.

It’s a paradox. Everyone’s telling you they know how to pick a “cert” like they have insider knowledge. It feels like you’re in the betting room watching the horses. But not everyone can pick a stock like Warren Buffett. He is a genius.

The bottom line is that excessive trading and watching the markets constantly will do harm to both your financial plan and your health. Investing is a long game – just ask Buffett, who holds companies for sometimes decades at a time.

Investing is like a ship

While no one can consistently time the market, we can predict that it will go up as well as down. While the avalanche of information is telling you to trade or change tactics, often the best approach may be to do nothing. If you have a long-time horizon, sticking to your plan is almost certainly the way forward.

If the likes of Cramer and “finfluencers” make you feel like you are on an investing roller coaster, think of your financial plan more like a long-haul shipping voyage. Your ship (portfolio and financial plan) should be seaworthy, robust and the right speed and comfort for you. The oceans are often choppy, with the potential to sink less sturdy vessels, but if you are willing to endure the occasional bout of rough weather (volatility), you will get to where you want to go.

The noise of 24-hour news channels has the potential to throw investors off course by constantly pushing “tradable” information. Your trusted financial planner can help sieve the information for you, presenting you with what’s actually valuable and relevant to you. Using the news, TV personalities or “finfluencers” as your sole source of investment analysis can sink your ship. How do they know you have to factor in care costs for an elderly relative, have two years left of work, or only need a portfolio return of 5% to live your “dream” retirement. Let’s not forget too, that by the time anything comes on your TV screens, it’s already been factored into market pricing.

Ironically, despite all the hyperbole, controversy, and his penchant for picking disputed stocks, Cramer summed it up best: “I wish it grew on trees, but it takes hard work to make money.” Why take on the risk yourself? Let your Financial Advisor filter your “newsfeed” to help you enjoy the retirement you deserve.

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OneLife Wealth Management

OneLife is a family wealth firm in Ottawa. The team at OneLife provides clients with comprehensive wealth and tax planning advice that is carefully designed to build, manage and protect their family’s net worth. Services at OneLife span from Private Wealth Management, Income and Estate Planning, Corporate Wealth Planning, and Group Benefits and Pensions.

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