Everyone knows the term of this week, or at least they know it when they see it. We define Financial Pornography as the gratuitous analyzing of market conditions that are out of our control, and causing people to fear because of it.
Ever witnessed a doom-and-gloom headline about the financial markets crumbling to the ground? Or, how about that the housing market will destroy the world economy?
Could these things happen? Yes! The funny part is that a recession or drop in the market happens in cycles. Even though external events may precipitate the drop, there's still a pattern. For millennials, it makes more sense to invest early, often, diversify, and allocate your investments appropriately. At this stage in the game of life, it won't help to monitor your investments on a monthly or quarterly basis. You still have at least 30 years until retirement. Relax!
What these news outlets do is make you fear where your money is invested, or where you planned to invest, and then have you tune in for updates. While you're watching the updates they are showing you ads during commercials. If you are reading online (because few millennials watch financial markets TV these days) that's how they make money!
Essentially these media companies are getting paid to make you second guess your investments, your financial advisor, and your financial plan. And we eat up every bit of it. You have to keep in mind, at the end of the day these are still media companies. They do not have your best interest at heart and are not fiduciaries.
It's a self-fulfilling prophecy. Any marketplace is based on supply and demand. Too much demand (buyers) and prices go up. Too much supply (sellers) and prices go down.
Hypothetically speaking, say a financial TV host, claims that Wal-Mart stock is going to go down, some of the people watching the show will panic, depleting their positions in that stock. The ones who didn't will see the price of Wal-Mart stock go down. Never wanting to miss out on these "special" tips again, they tune in for every single episode around the clock.
Here's the issue, there's no accountability to those tv hosts. If their listeners make money, they'll make money because more people will consume their advice looking for the next great tip. If their listeners lose money, they'll make money because more people will tune in to wonder what went wrong. Either way, ads are being served and their revenue keeps coming in. There are no ramifications like there would be if I posted a Youtube video telling everyone to buy a particular stock.
I implore you PLEASE view everything you hear through the lens of your financial plans built around your financial goals. Want to know why I'm not bothered by the drop in the stock market over the next few years?
- I wouldn't recommend anyone invest if they will need the money within 5-7 years or less
- My time horizon (when I will need the money I've invested) is 40 years for retirement. Anything happening in the next 10-15 years won't affect me in the grand scheme of things as long as I have diversified and allocated my investments correctly.
Have you fallen victim to panic after watching financial pornography? I want to hear your story!