Fear vs. Reality-Based Investing

This article was originally published by Zacks.com.

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This is just a sample of the commentary headlines and marketing messages from around the investment world this morning. And it’s the same basic formula these folks have been pitching since the Great Recession started in 2008. As they say, “fear sells.

The problem is that fear doesn’t always produce the best results for your investment portfolio. That’s because the economy and stock market started rebounding back in March 2009. Since then the S&P 500 has basically doubled.

Those following the ill-advised fear-based messages have not enjoyed any of the benefit of the very real economic recovery and rise of stock prices. Unfortunately those peddling the fear did benefit by getting you to buy more of their subscription services.

What is an investor to do?

I have a couple pieces of advice that should help you going forward.

Ferret out the fear mongers

The investment landscape is often a difficult one to read given the multitude of things one has to consider (economy, politics, world events, earnings, valuations, etc). That is why there are such diverse opinions on where stocks are headed next.

However, some commentators have a natural bias to be more optimistic or pessimistic no matter what is happening in the real world. In knowing their motivations you will be better able to interpret the value of their message.

As for the fear mongering types who produce headlines like those shared above, their bias is simple. They will do or say whatever it takes for you to buy a subscription to their services. These people cannot be trusted.

Note there is a difference between an article that has a bearish opinion and one that is trying to scare your pants off. Whenever you discover a writer or an organization that tends towards those fear-based approaches, it is best to write them off immediately as charlatans as they only have THEIR best interest in mind. Not yours.

Read more.

Steve is the Executive VP in charge of Zacks.com and all of its subscription services.

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