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Investors' guide on media hype
Fri, 15 Oct Pre-Open

Technology has mostly been a boon for the investor. It has enabled faster, cheaper and tremendously more convenient transactions for investors in the stock market. Gone are the days when the average investor had to wait for the next day's newspaper to see something even as simple as the quotes of his favourite stocks. To the extent that now even buying/selling through one's mobile phone has become a reality.

But along with the benefits has also come one major complication for the keen investor. He is now bombarded with financial market information. The talking heads on TV, magazines, newspapers, SMSes, brokers' sales forces, ads, websites, emails, newsletters, the list goes on. Along with other things, technology has also enabled the media to scream louder and louder for your attention.

Keeping up with such a barrage of information can get quite overwhelming at times. And the urgency with which it is presented seems to imply that every bit of it is the most important thing you'll ever read. Further, with so much new content being generated every single day, you wouldn't be wrong to think that it is next to impossible to keep track of everything. This, then, begs just one question. If one wants to be a good investor, is it necessary to keep track of any and everything related to the financial market that comes your way? Would you be any less good at investing if you choose not to keep up with everything single thing that is thrown your way?

The answer an emphatic 'no'.

And to understand why this is the case, one needs to understand the source of all this information a little better. For this, one needs to ask only one important question - what are the compulsions and incentives of the people who put out all this information?

Probably the biggest mandate of any content generator in the media is to increase the viewership/readership of the show/publication. Their company's survival and profits (which are from advertising in most cases) are directly proportional to the eyeballs they can attract. All their content is designed towards just this one, all important, goal that they have.

The stories have to be interesting. The headlines have to be catchy. And the content needs to written well enough to attract and hold on to the reader's attention.

Amongst all this, one plain and simple fact deserves closer attention. Nowhere do their mandates resemble anything close to 'to publish only those stories or articles that help long term investors make wise decisions about investing'. Or 'to dig out and publish information that will facilitate sound investing'. In fact, the naked truth is that most such writers are kept so busy with achieving their earlier mentioned goals, that they may never have even stopped to study what long term sound investing is all about in the first place.

The media world continues to get competitive though. And as competition levels increase, the battle for eyeballs has become more furious than ever before. With that, the compulsion to put out more and more content has also attained higher proportions.

In light of all this, probably the biggest need of the hour for a serious investor is to develop a sound mental framework for investing by studying how successful investors have gone about doing so in the past. And in the process, attain the all important ability to separate the few important data points from the cacophony of empty noise that will only increase as time goes by.

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Feb 19, 2018 (Close)