Sound Advice for a Sound-Bite Society
Recently, I had the opportunity to offer insights about the market as a guest on CNBC. I invested six hours preparing my thoughts, driving to and from the station, and waiting to appear. The interview lasted 59 seconds and was preempted by “breaking” news that Oculus cut the price of its virtual reality headset. Wow, how things have changed! What the heck is a virtual reality headset? Personally, I don’t see anything wrong with regular reality!
Like it or not, we live in a society in which most people have very short attention spans. The 15 minutes of fame that pop culture icon Andy Warhol allotted each person in 1968 seems like an eternity in 2015. The average commercial is now just 15-seconds, replacing the 30-second spot, which replaced the one-minute commercial. Yet, if your genetic endowment and lifestyle choices deliver a 90-year life span, your waking hours allow for well over 1,400,000 15-second sound bites. A television or radio ad may not be worthy of your time, but there are other matters that merit a generous share of your attention.
As a case in point, we help clients develop an appropriate asset allocation based on their long-term goals, risk tolerance, and a careful evaluation of investment alternatives. In most cases, data used to assess market risk and return goes back at least 30 years. While most investors are on board with a long-term investment strategy, their resolve can be tested by the constant bombardment of up-to-the-minute financial and economic data. It’s not hard to understand why.
I am not suggesting you never watch CNBC or follow the markets again. On the contrary, it’s important to develop a good understanding of the markets and how that data affects investment returns and investor sentiment. I am suggesting that you avoid making impulse decisions based on current data when your planning horizon is long-term. It’s natural that we tend to emphasize the most recent experiences and project these into the future. However, this is the primary reason most investors are overly bullish and buy stocks at market peaks, and overly bearish and sell stocks at market bottoms.
Wealth Advisors monitors data constantly to look for signals that some part of the market is either attractive or looks overpriced. We don’t react to every bit of news, but rather build cases over time. Stock and bond indices fluctuate daily, but the fundamental data supporting the financial markets moves at a much slower pace. Our investment process helps us filter out the near-term noise and remain focused on helping you achieve solid long-term returns.
The society we live in today is fast-paced and impatient. I think it’s great that I can preorder my Starbucks and pick it up without waiting in line. Clearly there are many daily activities and encounters where faster is better. And if I find some virtual reality goggles that can show me what is going to happen tomorrow I will gladly adjust and invest accordingly. Until then, I will continue to downplay the daily news, both good and bad, and maintain an investment philosophy that is supported by data and fundamentals rather than daily headlines.
Meet the Author
Partner + Chief Investment Officer
Darin Richards, CFA®
Aldrich Wealth LP
Darin joined the Portland wealth management firm in 2004, bringing more than a decade of investment and financial consulting experience with him. As chief investment officer for Aldrich Wealth, Darin is responsible for developing, and implementing our investment philosophy and leading the investment committee. He works directly with some of our most complex and largest clients and also…
- Series 7 and 63 security exams
- Chartered Financial Analyst (CFA®)