Sunday, October 26, 2008
Media to Blame, Too
Being informed is not always golden. It doesn't hurt to have the knowledge, but sometimes the way the knowledge is dispersed or presented can cause alarm. Alarm leads to irrational actions.
I believe in freedom of the press. With this freedom comes responsibility to present truth in an even handed way. Many times the media psychs the public by sensationalizing its headlines. With BIG BOLD LETTERS they headline stories on the economy making the economy seem worse than it really is. Many people latch on to that and panic. Then they go sell their stock at a loss, which makes things worse than they were. The headlines become self fulfilling. Today's Wall Street Journal with today's headlines is a good example of this. It splashed big headlines concerning how the world might be going into recession. Does that make you want to invest your money?
The irony of the thing is that, many investors depend on the news in the Wall Street Journal to help them with their investments. Lately it seems as though they are hindering investors as they are caught up in the frenzy of bad news about the economy.
The sad thing is this: a lot of people have bought high and are selling low, so their money truly is going away. Now they do not even have shares that will grow in the future. When the market recovers and shares start going up in value, these people who sold low will not be able to recover their losses. Those who bought these shares at this new, low, discounted price will thrive when the market begins to recover.
Don't pay too much attention to economic news at this point if you are holding stocks or mutual funds. Hang in there. The markets are cyclical, and they will get better.
Those of you with 401Ks. Your account may be down now, but keep contributing because your money is buying cheaper shares. Therefore you get more shares for your dollar. If your employer is matching funds, that will make your investment even better in the future.
I say it again: Now is the time to buy!
I wrote this without the intoxication of coffee!.... which means, I am insane all of the time.