As investors, we are bombarded with information all the time. This is especially true today when the Internet overwhelms us with information of all kinds. The problem is that much of the information is not only useless but has the potential to deflect us from our long-term destination.
Here are the sources of information that a long-term investor should ignore as much as possible:
Short-term stock market movements. It is useless, even dangerous, to follow the evolution of the markets and your securities in the short term. What is the point of watching the price of your stocks every day (or more frequently)? If it were possible, would you want to follow the evolution of the value of your house every day?
Most economic data. In my opinion, you have to know roughly where you are in the economic and stock market cycles. I have written about this in the past. But it is nevertheless counterproductive to follow the evolution of all the economic data published on a regular basis. Inflation, employment, GDP, Federal Reserve decisions are not data that should unduly influence your decisions. Politics should be included in the bundle.
Your short-term returns. What’s the point of knowing how your portfolio performed last week? Last quarter? Even last year? And is it really useful to know if your portfolio is outperforming the market in the short term?
The performance of specific securities in your portfolio. If you need to assess the performance of your portfolio, do so over a period of at least five years. Is it worth focusing your attention on the disappointing performance of a few stocks in the portfolio? What matters is its overall performance.
The yields of others. Is it useful to compare your returns, especially in the short term, to those of your neighbours, friends, or relatives?
Trending stocks. There are always trending stocks or market segments. Or almost always: I see few or none in the current market! Better in my opinion to ignore the sometimes extraordinary and very enticing performance of what is fashionable.
The forecasts. It is an illusion to believe that anyone can make valid forecasts on a regular basis, whether for the economy, the short-term evolution of the stock markets or the future profits of companies. It is better to ignore such forecasts in one’s decisions on stock market securities.
Social networks. If you go on social media, do it for their entertainment value, not for the information you’ll get from it, at least not for your investments.
The prophets of doom. Anyone who predicts the end of the world will have a much larger audience than someone who is measured or optimistic long-term. The media often favours what is sensational because that is what will attract the most interest.
