ARBOR WEALTH: Financial eEntertainment: The right side of the amygdala
“If the London Bridge is a fallin’ down
And ol’ Big Ben is stopped …
I’ma tellin’ you that’ I’m a happy man …
And I’m hanging on to what I’ve got.” From “Hangin’ On To What I’ve Got” by Buck Owens, Dusty Rhodes, Billie Jo Spears and Tom Brumley
How often do you watch Jim Cramer? Do you read Yahoo Finance and Marketwatch daily? Do you talk constantly with a friend who always has a hot stock tip for you?
Who wants to know? Probably your financial advisor. Because if you watch and read these television shows and websites, respectively, on a daily basis, there’s a good chance you’re too jittery to be a successful investor.
There’s a great distance between economic analysis and financial entertainment. Simply put, it’s the difference between The Economist Magazine and Jim Cramer. It’s the oceans of gray that exist between Project Syndicate and Marketwatch. And it’s the stark contrast between Yale’s Robert Shiller and CNBC’s Rick Santelli.
Entertainment is meant to titillate, to excite, to anger, and many times, to frighten. If the NYSE crashed every time Marketwatch featured an article predicting that exact occurrence, we’d have all been broke eons ago. Market television is all about ratings and advertising revenue. The numbers may be right, but the information may also be purposely sensationalized and misleading.
It’s no accident that news is presented in an overwhelmingly negative fashion. The amygdala is the part of our brain that, according to Oxford University neuroscientist Baroness Susan Greenfield, applies ten times as much meaning to negative or threatening inputs than to positive information. Enter dramatic economic television and websites, where doom dominates our attention and our emotions.
True market analysis and productive portfolio management is much more intellectually driven and sedate. It’s not screaming hosts, ominous warnings, flashing screens, pithy chants and clanging bells. It’s the painstaking, steady process of balancing equities with fixed income instruments. It’s performing a tax analysis on existing portfolio holdings before initiating further trades. It’s understanding what you need your money to do for you. It’s waiting until the market provides a propitious entry point, then monitoring those same investments. It’s creating income through investments so you will enjoy enough cash flow in retirement.
Like the man said, “Television does a better job covering revolution than evolution.” Things that take lots of explanation, and that require a viewer to work through an elaborate thought process, are not often wildly popular on television. Yet, that’s what many investors need: carefully planned and well-monitored investments that provide steady growth and crafted, measurable downside protection. For folks nearing and in retirement, it’s not about excitement over the next great thing. It’s about getting your financial ship safely to shore.
Margaret R. McDowell, ChFC, AIF, a syndicated economic columnist, is the founder of Arbor Wealth Management, LLC, (850-608-6121 — www.arborwealth.net), a “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.