Why Smart Investors Ignore The News?

Chuck Jaffe in an article on MarketWatch argues that as a smart investor you need to learn the skill of ignoring the news. You can read the headlines but never trade on them. Always think long term. News is what creates the volatility in the market short term but long term this volatility gets factored out.

If you’ve been changing your actions based on the news, the headlines or the websites you favor and it hasn’t been improving your investment results, it may be time to disconnect your portfolio from what you are reading and listening to.

Said Riley: “If you get the long-term forecast wrong – if you miss out on the trend for the next few decades because you’re concerned about what could happen in the next few weeks or the few weeks after that – that’s how you wind up in real trouble. … It’s not about how many corrections or downturns you called right if all those moves don’t add up to making real money over a lifetime.”

However this can only work if you are a long term investor. And in case if you are a day trader or a swing trader trying to capitalize on the market volatility, you need to take the news into account. News is what moves the market short term and as a day trader you are trying to capitalize on it. But you will see that the impact of news is short term. Most of the trends started by the news last for a few days to a few weeks. Long term only fundamentals work. News gets factored out.

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