No news is good news

As our world grows smaller, the number of options we have available to us grows. The global market has connected us to events that in past years would often be buried in the back pages of the newspaper, but today are front and center.

Nowhere has this become more evident than in the stock and bond markets.

Interest rate changes in India, housing demand in China, weather and natural disasters, technology – all contribute to the daily gyrations of the prices of stocks and bonds. When I was first studying to be a financial advisor, the only place I could get historical bond prices to do yield calculations was in the public library in the periodical archives. Today, it’s not only available to anyone with a wireless connection, but you can get real time updates, historical pricing and forecasts all with a couple of clicks on your browser.

So what does all this mean? In the investment world it means that time, in many cases, has been removed as both an advantage and a buffer. Technology has delivered most information into the hands of anyone willing to look for it. In the past, having access to certain information could bestow the holder with a tremendous advantage when buying and selling securities; today that same information is readily available to almost anyone. Don’t get me wrong, there are still great advantages to be had in holding information, it’s just that the valuable content is purposefully buried even deeper and thus harder to get at.

As a buffer, we are all victims of the noise now. We are bombarded with information that for many of us has little impact to the medium and long term fortune of our lives. In fact, if we are holders of strategic investments rather than traders—who purposefully buy and sell currency or stocks—much of the data we are exposed to is of little use. We may think it’s important to know what the Fed or Bank of Canada has to say at their meetings, yet few of us are able to determine how this information is of any value to us in the short, medium and long term for our retirement prospects.

Our advice is always the same. Return to your original objectives and remember what your plans were when you made them. When you hear that the US Federal Reserve might raise the Fed funds rate or that OPEC isn’t going to decrease oil production levels, ask yourself: does it matter to how you manage your life or your investment portfolio? Do you need to react to this information somehow and if so, what should you do? Sure, if it constitutes a trend and you can identify interest rates may start climbing dramatically or that oil prices will fall for an extended period of time maybe you should look at your maturities or asset allocation for some fine tuning. If it’s just day to day noise though, you may want to filter it out and lower the level of static in your life. Everything we hear or read isn’t necessarily important; just because we can see it doesn’t mean we need to do something about it.

Photo: Thinkstock.com

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.