Understanding Financial News
BY: LAURA ZAKRAJSHECK
OPERATIONS MANAGER, THE MILWAUKEE COMPANY
“Life Moves Pretty Fast. If You Don't Stop And Look Around Once In A While, You Could Miss It.” That’s a quote from the movie, Ferris Bueller. (If you didn’t already know that, watch the movie.) I think the same is true nowadays with financial news. With news happening 24/7 and global markets opened at all hours of the day how do you keep up and know what’s important.
If you look back approximately 30 years ago, if you wanted to learn the latest stock price you had to look it up in the newspaper to see what happened the previous day. I remember doing that back in economics class in high school. We all had to track a stock throughout the semester by doing just that, looking it up in the newspaper and then plotting it on some graph paper for the semester. Today, I can’t imagine any kid doing that. Times have changed, especially with the explosion of the internet and cable news everywhere, at any time of the day or night. Now there is so much financial news available at your fingertips how do you understand it - let alone know how to decipher it. And most important, what do you do with all the news you read or hear. On the same topic there can be a wide array of different views. Well, here are some ideas that may help you figure it out.
Tip One. For Perspective - Read Old Financial News, Blogs, Watch Old Podcasts, etc. – it Will Help You Understand Current Financial News.
Reading old financial news, blogs, or watching an older podcast will show you that most of the big financial news of that time did not turn out to be that important and was not memorable news in hindsight. Keeping this in mind when you look at current news helps put the current headlines in perspective and makes you look at them differently when you think, as you discovered from reading old financial news, will this be something memorable enough to remember it a year from now?
Tip Two. Gather Information From a Different Point of View But From a Source You Trust.
Read articles/blogs and/or watch podcasts, etc. from someone with a different view than yours but from someone you find trustworthy. Learning the other sides point of view will help you better understand yours, as it will show you how the other side will behave when something happens in the market.
Tip Three. Use Both Professionals and Non-Professionals as News Sources.
Looking at the Wall Street Journal is a great professional source to help understand financial news but so is looking at bloggers/podcasts, and the like that are not quite so well known. Doing so will give you a good balance between professionals and others. It’s important to find a balance in news sources to better understand what is actually happening.
Tip Four. Understand What Type of Investor You Are as well as What Type of Investor Your Source is Coming From.
Are you watching a podcast from someone who talks about taking more risk than you are comfortable with? Are you reading a blog about day trading? Everyone sees and uses the market for different reasons and understanding where the author, blogger, or podcaster is coming from is important so that you can better understand and decipher your viewpoint.
Tip Five. Not Every Story You Read, Podcast You Watch, or Blog You Read Means That You Have to React and Take Action in Your Portfolio.
Hearing or reading about earnings reports most likely won’t trigger you to take action in your investment account. Ideally reading or hearing about an earnings report or some other financial news may, however, guide your thinking in one direction. Meanwhile, it will guide someone else in the other direction from you. Understand that the author, blogger, or podcaster does not know who you are so read/listen to the advice with caution and ask yourself where the author is coming from/what are his/her goals by me reading this article/blog or listening to this podcast.