The business media and the stock market

Jonathan Chevreau, the personal finance columnist of The Financial Post in Canada, writes Tuesday about how the business media influences investors in the stock market.

Chevreau wrote, “Have you ever wondered why it’s front-page news when a market ‘plummets’ 500 points in one day, but three consecutive 200-point moves up are relegated to the business section?

“This is why financial advisers tell clients to ‘ignore the media.’ Panic stories about the market make exciting headlines, but don’t let them lead you to make knee-jerk responses. Over-reacting to ‘corrections’ usually entails selling at lows. Likewise, there’s no point to diving in as markets reach record highs. Often, you’ll just overpay for assets. Long-term investors usually take partial profits when markets are euphoric and buy when the masses are fleeing.”

Later, he noted, “The press tends to be critical about mutual funds, particularly in Canada, where management expense ratios (MERs) are higher than they are in many countries. But that’s no reason to write them off entirely. For starters, MERs are inching down at a number of financial services companies. The real point, however, is that investors generally get value for the fees they pay, namely in the form of diversification and profes-sional security selection. Whether markets are rising or falling, they can rest easy knowing they’ve hired professionals to make decisions on their behalf.”

Read more here.