“Is the US Going Broke?”
"Social Security's Coming Crisis”
"The Economy's High Blood Pressure”
"Exploding Federal Debt: Why So Dangerous?”
"Joblessness is Here to Stay.”
I know I’m not the only one who’s seen headlines like these in my social media and news feeds lately. And as worrisome as these hot takes sound, what’s even more concerning to my team at Keen Wealth is how they can scare investors into making mistakes that can ruin their financial planning.
On today’s show, we discuss how to keep media scare tactics out of your head, out of your decision-making, and out of your portfolio.
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Key Insights on Media Scare Tactics
What’s old is new again.
Let’s take another look at those headlines I shared at the top:
- "Is the US Going Broke?"
- "Social Security's Coming Crisis"
- "The Economy's High Blood Pressure"
- "Exploding Federal Debt: Why So Dangerous?"
- "Joblessness is Here to Stay."
Take a moment and try to guess WHEN these specific headlines were published. Then scroll down past the Keen Wealth logo for the answers.
- "Is the US Going Broke?" (March 13th, 1972)
- "Social Security's Coming Crisis" (September 1974)
- "The Economy's High Blood Pressure" (July 1978)
- "Exploding Federal Debt: Why So Dangerous?" (October 22nd, 1984)
- "Joblessness is Here to Stay" (December 21st, 2009)
As you can see, anxiety about the state of the economy is nothing new. There always have been doomsayers in the media and there always will be. The real difference between then and now – other than the fact that our economy has grown bigger – is that the chatter is louder, more constant, and spread across more diverse outlets.
Which begs the question: Why? If the long view of our economy continues to trend upwards, why are we so inundated with doom and gloom scenarios?
Bad news is good for business.
When the markets are chugging along, and our portfolios are up, we don’t think about the economy very much. That means we’re not clicking on as many headlines or tuning into the hourly market updates on TV. By contrast, when the economy or the stock market is doing poorly, we tend to click on the news more frequently. For example, CNBC viewership hit its all-time peak in March 2009, just as we hit the worst part of the last bear market and panic set in for some investors.
Big media firms keep getting better and better at delivering the kinds of content that their audiences react to. That being said, I’m even more concerned about less-reputable outlets further down the financial food chain.
So many of our friends and clients forward us newsletters projecting end times for the markets, offering solutions that can save your portfolio – if you buy the product they’re selling or pay a fee, of course! What some folks don’t realize is that they’re just one subset in a larger scam. An investment newsletter scammer starts with a pool of people, sending a bullish prediction to half the group and a doomsday prediction to the other half. Then, the group that they were right with gets split in half and the same thing happens. Finally, a third time this happens, and the scammer has created a group of people that they were right with three times. After receiving three predictions in a row that were correct, this group of readers is more likely to get taken in by an offer to buy a newsletter with more predictions – often for high prices. (This tactic is also used by newsletter scammers focused on sports betting!) These folks don’t realize they’re victims of scam marketing, so why shouldn’t they believe the information they’re receiving is legit?
When it comes to whom you trust for reputable financial information, please think before you click. Don’t let some scammer with a good-looking website trick you into thinking he’s a reputable fiduciary advisor.
The big cost of emotional reactions.
And don’t let cable news or social media scare you into making a rash decision about your finances.
Between January of 2007 and the end of 2017, investors withdrew $1.3 trillion from equity and mutual funds. Many withdrawals were due to anxiety about the markets during the 2008-2009 downturn, skepticism and political negativity surrounding the so-called Trump Rally, and uneasiness from young investors who feared another downturn.
However, since 2009, the S&P 500 has gone up over 371%. How many millions of folks lost out on potentially millions of dollars because they let the media or their personal biases scare them out of the markets?
Now, some of those withdrawals ended up in bond markets, and certainly diversifying your portfolio is a strategy we endorse here at Keen Wealth. But according to Hartford Funds, an equity investor who placed $10,000 into the S&P 500 Index in 1973 was sitting on nearly $838,000 at the end of 2017.
And a balanced investor who split that $10,000 50/50 between the S&P 500 Index and the US Long Treasury Total Return Bond Index had $609,000 at the end of 2017.
And the reactionary investor – the one who tried to time the market and move in and out during corrections – made about $419,000 at the end of 2017. That’s half of what he could have earned by simply ignoring media scare tactics and staying the course during market volatility.
What goes up must come down … for a little while.
One more scare headline you might have seen recently is economic data showing that since 1850, there has been at least one recession in the US every single decade. We haven’t experienced one since 2009, so history suggests we could be due for one in the next 18 months.
Well I’m going to put my own hot spin on that same headline: if there’s been a recession every single decade for the past 170 years, that just proves that market volatility is normal, and our economy tends to bounce back!
In fact, when the market experienced a normal 10% downturn earlier in the year, not only was my team at Keen Wealth unsurprised, we were prepared. We knew from experience that some of our clients would soldier through this latest volatility, and we knew that we would have to help others review how their diversified portfolios were structured to cope with the expected ups and downs of investing.
That’s the difference between trusting a headline designed to scare up clicks, and working with a Keen Wealth fiduciary advisor on a financial plan designed to serve your best interests for years to come.
Bill Keen on Media Scare Tactics ...
"Don’t let cable news or social media scare you into making a rash decision about your finances."
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Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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