Unlike the tiny percentage of the American population who live exactly the way they want after they transition to retirement, far too many who have already exercised tremendous dedication to accumulate a sizable Retirement Bucket™ of investments live in constant fear financially. And this severely limits the lifestyle you’ve earned.
Unfortunately, maintaining your financial confidence in today’s ever-changing and fast-paced world is more challenging than ever. There are obstacles confronting you at every turn. Today, I’d like to discuss the first of two Confidence Vampires you must be alert for.
Confidence Vampire #1: Financial Journalists
Take a step back for a moment and think about the “business” of financial journalism for a moment (newspapers, television, magazines, radio, internet).
I will preface this to by saying I mean no disrespect to financial journalists, nor do I question their right to run a profitable business. However, if you want to develop and maintain the unflappable financial confidence necessary to live the life you’ve earned in Phase II of your life, it’s critically important to recognize that their goals and objectives are in direct conflict with your financial confidence.
The way the media makes money is not by informing, teaching, or advising us, and it’s not by providing us with the most relevant and timely information we need. They make money through advertising “sponsors,” i.e. companies looking to promote and market their own businesses.
So, the #1 goal and objective of all forms of media is to convince as many thriving companies, who are looking to get their “message” out to as many potential consumers as they can, that they have the largest audience of viewers to deliver their advertisements to.
Skilled Copywriters Create Confusion and Unrest
How to do they accomplish that in today’s day and age? Since investing, in and of itself, isn’t very exciting, their skilled copywriters are paid handsomely to stir the pot, generate confusion and unrest, and convince viewers that the world’s financial system is fragile and unpredictable, that markets could crash at a moment’s notice, and that the only way to protect ourselves is to “tune in” and watch.
It’s a great tool for them to sound unnecessary, but extremely effective alarm bells, capture your attention, and strip away your confidence.
Why Do They Use Points vs. Percentages?
The most blatant example of this is how they report stock market activity throughout the day. You may recall that in October of 1987, the Dow Jones stock market index fell 508 points. Back then, that represented a 22.5% drop in one day!
Today, 508 five hundred points represents about a 1.5% drop, but the financial media still uses the term “points” throughout the day. Why do they continue to do this when it’s clear to any rational observer that it’s a distorted measurement of what is going on?
The answer is two-fold. First, “points” sounds like a much bigger deal than it actually is. If they say, “The Dow fell 500 points today,” that conjures up a lot more fear and anxiety in the viewer than “The Dow fell 1.5% today.”
The second reason, which is brilliant marketing on their part, is to condition you to “keep score” of your investments on a daily basis just like you would keep score of how your favorite team is doing.
Keeping score every inning in a baseball game is necessary to determine how well your team is doing. However, when it comes to investing, everyone from Warren Buffett, to Peter Lynch, to Nobel-prize-winning laureates like Eugene Fama insists the last thing you should do is react to what’s happening on a daily basis, i.e. keeping score daily.
This is not a recommendation to stop paying attention. Simply be aware that there is a significant conflict of interest between the financial media’s goals and your goals when you tune in and protect your confidence at all costs.