Why You Should Never Consume Financial Media
Fear, greed, hubris and boredom are what derail buy-and-hold investors
If you want to be a successful long-term investor, you must master the art of doing nothing.
When I say do nothing, I mean literally just sit on your investments for a few decades and let the markets and compound interest do all the work for you. In finance terms, that’s called being a ‘buy and hold’ investor.
Logically, most of us know that this is the smartest way to invest.
It’s when emotions—greed, fear, hubris, and boredom—get the better of us that we tend to veer off the logical path of continuing to hold onto our investments.
The entire financial media system is designed to elicit greed, fear, hubris, and a sense of boredom in the buy-and-hold investor.
The primary way in which they get you to feel these financially damaging emotions is through a narrative or story.
How narratives drive emotional decisions
A 2024 paper titled "Narrative Emotions and Market Crises," by Richard J. Taffler, Vineet Agarwal, and Maximilian Obring explores how investor emotions, driven by narratives in financial media, influence not only individual investors but the entire market.
The main objective of the study was to show the emotional content of financial news can be a key driver of the stock market—-especially during times of extreme uncertainty
The researchers analyzed financial media articles from three major market crises:
The dot.com bubble (1998-2002)
The Global Financial Crisis (GFC) (2007-2011),
The COVID-19 pandemic (2020).
They collected data from major newspapers and financial journals, to see how many of these articles were framed in a way to make the reader feel one of seven emotional reactions: