Should You Let Financial News Influence Your Investments?
Financial news is readily available these days. Newspapers and magazines, TV channels, radio stations and the Internet all feature them daily. But can they really be taken as reference points for investors?
Most financial news draws on company press releases, so they are more or less the same, regardless of the medium through which they are presented. They are usually about one of the following: joint ventures between companies, company takeovers, job creation or job loss, the winning of business contracts by companies.
The widely available business news comes almost exclusively from major companies. Small companies get relatively little attention in mainstream media, unless they make a major breakthrough in their fields, which doesn’t occur often. So, for news on small companies you usually have to grab niche business magazines.
Good News, Bad News
All financial news can be classified as good news or bad news. For example, good news can be an announcement that a telecommunications company is extending its coverage to new countries. Bad news comes in many varieties, including the announcement that a company is cutting jobs.
Financial news needs to be judged in the nation-wide or world-wide economic context. That’s because good news is not always as good as it first seems; similarly, bad news may turn out to be not that bad.
An example: a car manufacturer reports that its sales have fallen by 5% during the last month compared to the month before. At first glance that’s bad financial news. Yet if you investigate the financial market, you may learn that almost all other car manufacturers in the region have reported greater drops in sales (between 7% and 14%) during the same period. So the initially bad news was not really that bad, since the company in question has done better than its competitors.
In conclusion, keeping an eye on the financial news is important if you’re an investor, but you should never judge news without regarding the regional or global economic situation. Don’t change your investment plans solely because of financial news: Talk to the experts at Compare The Financial Markets.
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