By: Nicole T. Strbich, CFP®, CPWA®, EA - Director of Financial Planning
Too often we find ourselves reading articles that predict financial doomsday or that have headlines designed to scare the reader into action or submission. In a world filled with non-stop news reporting and endless platforms to promote ideas, sell products, and gain attention, it can be very difficult to determine what is important and true. To help you determine where to focus and how to analyze the financial planning and investment news that you receive, we have compiled some considerations and questions to ask yourself as you browse the news.
Four questions to ask as you scrutinize news and information
1. Who is the author, publication and/or sponsor? If the author represents a fund or insurance company or is sponsored by one of those companies, as you read the information be aware of their likely viewpoint and intention. If the article is from a publication, review the information provided and look to see if both sides of the discussion are presented and considered. If you don’t see both sides presented, or if the article has a sales intention, look for other sources to round out the information and get the full story.
2. What is the impact to your portfolio? Predicting the demise of the stock market is sensational and garners attention, but you should consider the likelihood of such an event and the impact to your portfolio. Articles like these are opinions and speculative predictions and should be taken as such. These authors know that it is difficult to separate our emotional responses to our finances with logic and our long-term objectives for a portfolio, so headlines and predictions are designed to prey on this vulnerability. Trying to time the market by selling out and then buying in later is not suggested as it is rarely ever successful. You and/or your advisor should be reviewing the allocation of your portfolio between equities and fixed income regularly – especially at times when you are concerned – and rebalancing to your specific target. Your portfolio should be designed with your individual time horizon, risk tolerance, and goals in mind. It will not look like your neighbor’s portfolio. So, even if your neighbor makes a change to their allocation, it does not mean that you should.
3. Is the author pushing a product or providing planning options? While it may be easy to highlight a problem (or concern) and then promote the merits of how a product can help, it is likely not the only way to address the problem and a different solution may be best for you. Look for information that provides multiple planning options with pros and cons for different individual circumstances.
4. Are the costs and benefits of the suggested action transparent and readily available? This is especially important for a sales or sponsored article. Be cautious of sales pitches that sound too good to be true. They are likely only presenting part of the information. Focus on identifying the costs, any concessions required (like flexibility, limited options, growth limits, surrender fees, etc.), and evaluate this in the full scope of your overall financial plan.
Work with an experienced advisor that can give you information and guidance based on your individual circumstances to help you sort out all the information available today. Make sure your advisor is a fiduciary so that their advice is always 100% focused on serving your best interests.
Please give us a call if you have any questions and if we can be of any assistance to you, your family, or friends.