Recognizing and Ignoring the Noise

2016 year to date has proven to be a very challenging time to be invested in the stock market. Words we’ve seen to describe the past few months include “bloodbath”, “turmoil”, “another 1929/2008”. Usually these terms are accompanied by large flashing red letters, yelling commentators, conspiracy theories, and doomsday scenarios.

If any of these things by themselves make you feel anxious or uncomfortable – you are not alone. It’s human nature to run from smoke because we immediately suspect a fire; our brains make these types of snap decisions to keep us from harm.

Unfortunately, uncertainty about our personal financial future sends our brains the same danger signals as if we were in an immediate life-or-death situation. Will I still have enough to retire? Will I still be able to send my children to college? To answer these questions, we search for answers, and thanks to the always-on media, answers are given to us readily and often with conviction.

However, there is still a problem. How can you be certain that these sources have your best interests in mind? Here are a few questions that you should answer before you give credibility to media financial advice:

  1. Where or who is the information or research coming from, and is that a credible and unbiased source?

Beware of online articles that quote “experts” who may have been quoted years ago under different context, or in some cases, may not exist. Check for cross-references – Google is very helpful here.

  1. How is this person compensated? What are they selling and what could they have to gain by convincing others to follow their advice?

If you’re reading online, look for legal disclaimers near the bottom of the article that may hint at where compensation is coming from. Do they want you to buy their book, or sign up for their newsletter? Do they want you to pay a fee for premium content? If you’re watching TV, are there cliff-hangers that make you stick around until after the next ad break?

  1. Is this advice focused on the short-term? Are their long-term goals aligned with my long-term goals?

Talk show hosts and authors are often compensated largely based on their viewership, because viewership increases advertising revenue both online and on TV networks. Network executives know that drama and fear increase viewership. Often times, the best investment advice is too boring for TV! Talk show hosts are not bound by any fiduciary standards and don’t keep performance track records.

At Sterling, we focus on controlling the controllable: our investment process, our market allocation, and our reaction to market corrections. We have tailored an investment strategy that aligns with your personal goals, your values, your risk tolerance, and your tax situation. We have also purposefully designed our investment strategies recognizing that volatility and market corrections are an inevitable part of investing and growth, and recognizing that today’s losers are often tomorrow’s winners.

Submitted by Sterling Retirement Resources, Inc. on April 8th, 2016

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