Financial News - Less Can Be More

Want to do better with your investments this year? According to some financial psychologists, the answer may be to stem the flow of financial news you take in every day. Turn off that financial news TV channel, resist the temptation to turn to the business pages of the newspaper, and ignore stock tips from your barber or beautician, they say, and your portfolio will most likely be better for it.

One reason is that, whatever information you glean from these sources, it almost certainly isn’t yours alone. With today’s technology, financial news is instantly available to every investor all over the world, all day, every day. And if the tip you have is truly the inside dope, you could run afoul of the Securities and Exchange Commission if you act on it. Perhaps more important, say the financial behaviorists, is that more information can make you overconfident, convinced that you see the implications behind the business news that no one else does.

There are studies that tend to prove that the psychologists are on to something. In one such study, half of a group of business students were given a minimal dose of data about the stocks in their hypothetical portfolio, while the others got to see all the facts. The first group did better than the second group, who tended to react to the buzz, buying and selling far more often and getting punished for bad decisions. One solution, according to the experts, is to set up a balanced portfolio at the start of the year and then leave it pretty much alone, checking on it perhaps once every quarter to fine-tune it.