Does financial media consumption lead investors to make bad decisions? Eric Nelson, CEO of Servo Wealth Management, thinks so — to the benefit of the advisors who can then save them from themselves.
“Almost no one ‘encourages’ panic or performance chasing,” Nelson tweeted, but “the vast majority of content” in the financial media leads to behavior that can cost investors dearly.
“Media seduces investors into ‘active management’ despite poor odds,” tweeted Nelson, who favors index-based strategies and Dimensional Fund Advisors funds. He continued, “Investors underperform their funds through performance chasing and fear.”
Citing Vanguard founder John Bogle’s book “The Clash of the Cultures,” Nelson said these behaviors could cost investors 1.3 and 2.2 percentage points a year, respectively.
But Nelson says that advisors can counteract those messages by enforcing investment discipline and building index-based portfolios — and that in shielding clients from media-fueled mistakes, advisors add 2 to 3 percentage points a year to their value.
Meanwhile on Twitter, CEO Robert Leahy of Leahy Wealth Management proffered his own warning about the financial media, Jeffrey Kleintop of Schwab played a wonky April Fool’s joke, Robin Wigglesworth of the Financial Times had some fun with former Federal Reserve Board Chairman Ben Bernanke’s new official portrait and Andrew McLaughlin of Medium made a currency suggestion for whatever planet Prince and David Bowie are now inhabiting.
On General Economic Topics:
Good advisors know this: the financial media is infuriating, but without them our value would be 2% to 3% per yr lower; talk about love/hate
— Eric Nelson, CFA (@ServoWealth) April 28, 2016
— Jeffrey Kleintop (@JeffreyKleintop) April 1, 2016
Barron’s article w interesting title started w/ this “The market will reward judicious stockpickers” ..whenever u see this crap stop reading
— Robert Leahy (@LeahyWealth) April 23, 2016
If you want stock returns with bond like risk, you’ll likely end up with bond returns with stock like risk.