A/B Conversations: CFP® Your Way Out Of It
A/B Conversations: CFP® Your Way Out Of It
Ep - #131 Tune Out The Noise
Being well-informed is a good thing. No one wants to make costly mistakes because they weren’t paying attention to important things or got bad intel along the way. But is it possible to have too much information? Listen to Adam and Ben discuss the fallacy of overreacting to the news media and headlines. Opinions and predictions aren’t important inputs into one’s financial plan. More often than not, we should just tune out the noise!
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[00:00:00] Adam Werner: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now.
Hey, Ben, how's it going?
[00:00:30] Ben Haas: I'm doing very well. How are you? Good. Good.
[00:00:36] Adam Werner: It's hard to imagine the first month of the year is behind us already.
[00:00:41] Ben Haas: Yeah. And we are looking forward to a Superbowl game in another couple of days. We are looking for warmer weather. We're looking for excuses to get outside. I hope.
[00:00:51] Adam Werner: So.
We're looking opportunistically at the future.
[00:00:57] Ben Haas: There we go. Yes, not letting the headlines of cold weather get us down.
[00:01:04] Adam Werner: Yes. So the focus of today's podcast, and I feel like we've talked about this in different iterations in, in different other podcasts too, but it's just the general theme of tuning out the noise when it comes to headline news, particularly around investments, because what we've seen, right, if we assume most people are like us that want to be well informed.
You want to make decisions from an informed position to avoid mistakes that can, when we're thinking finances could end up being costly in the long run, but is it possible to have too much information in either watching too much news, listening to too much, you know, headline news or reading too much when it comes to financial news?
Research may indicate that too much or a higher level of input may lead to not so great outcomes.
[00:02:03] Ben Haas: Yeah. So, so two things on that. First of all, I have been paying attention a lot more to like retiree research as we, that's our primary mode of business working with retirees and kind of understanding the difficult transition.
The number one thing that retirees do in retirement, like how they spend most of their time is watch TV, right? I hope that's because there is more free time and not because they're not connecting socially or finding other ways to engage. But with that, pair that with this research, there was this MIT study, this was done a long time ago and it was with MIT students.
But basically what the professor did is wanted to see the impact of news on how these students would go about buying and selling a certain company, right? So to one sub segment, all they got was the financial data on this company over a period of time to the other group, it was that same financial data, but all of the headline news on this company, and you can probably see where this is going or else I wouldn't be bringing this up on the podcast.
The group that had all those other inputs, the headline news, they fared far worse than the group that was just focused on the investment data. And there's really one, only one explanation for that, and our human interaction, right, our human emotions, input to what we're trying to judge it really just blurred the lines for those students instead of just relying on the statistics.
[00:03:24] Adam Werner: Yeah. That's such a human aspect is to hear a piece of information, whether it's fact or opinion, which we can talk about some of that. When you were just reading a headline, I think for the most part, we are just defaulting to, well, this is, you take it at face value.
I assume this to be true. And if that makes me feel a certain way, either really, I'll say thinking opportunistically, and I'm enthused by this information I'm going to, and I feel good about it. That may lead to taking more risk that may be warranted in the situation. But I think where we see it most often with clients, it's the other way.
You hear the Doom and Gloom headline and now it's, I want to run, I want to run to safety. I want to get out of the lifeboat, right? Right. I know I'm safe here if I stick to the plan. But I don't feel so great if these negative things are correct, then I probably should be doing something safer.
And that's where we see just that emotional aspect of how people interact with their savings and their investments can lead to maybe some costly mistakes over time.
[00:04:28] Ben Haas: Yeah, I think there too, not just opinions, but so often in the world of finance or economics, politics, let's put these all together, right?
All these things that we're probably charged up about. Predictions can be assumed to be like some sort of future guarantee of what's going to happen. I mean, how often do we get asked in the first couple of weeks of the year? And we're not even these big investment guys, but you get clients are like, so what do we see happening in the market this year?
You know, what are the experts saying? You know, those predictions, they mean nothing. I mean, we could probably give any number of examples looking backwards where something was predicted to happen that didn't, or just the fact that change is hard. So when we do see a change in administration, when we do see change in laws, when we do see the economics ups and downs change, then assume that we have to change with it or that we should be pivoting when we just, we don't know if that's necessary or not.
[00:05:29] Adam Werner: Yeah. And even just something as simple as, as you said earlier, working with retirees, building wealth, right? They've now accumulated and they've done hopefully the hard work of saving to get to that point. And now when you have maybe, what will at some point be a finite pool of resources, the natural thing is to preserve that.
You don't want to see that, that safety net kind of go away. So, already the inclination is certainly towards less risk than more risk, which again, I think just feeds into the, when there are negative headlines, it kind of pushes someone even further down that scale to, I don't want to see fluctuations, I don't want to be whipsawed, you know, back and forth in the market.
Can I just go somewhere safe and get a decent rate of return?
[00:06:19] Ben Haas: Let's look backwards at some of the bigger headlines last year that I think naturally, even for us would have given us pause to go, Ooh, let's pay attention to this. Does this necessitate some sort of change in how people are allocating their dollars and how people are saving? Even younger people will come to us and say, is now a good time to start investing?
Right? And sometimes that question's coming from, but I heard this and this makes me uncertain or, Hey, there's an election coming up or now, and now it's a new administration. Is this a good time to get started or not? I'm a little, you know, uneasy. Start where you want, but I think we could probably just use the recency of 2024 to say, it's good you tuned out the noise because here we are today in a better position financially than we were on January 29th last year.
[00:07:08] Adam Werner: Obviously the news for the most part, or the media in general is there and their, goal is to get eyeballs, right? They are meant to attract viewers. That's how they sell ads. That's how they make money. So there is an entertainment side of it, I think, but there's no shortage of again, I'll pick on them, right?
It's negative things that typically get the most engagement. I feel like that's a social media thing recently, too, that there is way more engagement with negative posts, right? If you can get under somebody's skin, that gets them far more engaged than positive news that is, Oh, well, that's nice.
And then you kind of move on to the next thing. So just that in and of itself. Again, I think tends to lead to more fear from people reading the news or certain headlines. But then when you expand that just beyond the U. S. and you think of all the negative things that can happen globally. Throw in wars all over the world, you got Israel and Hamas and maybe there's some progress happening there, which is, seems like that's good news.
War in Ukraine and Russia, like all of these big, and that's, those are just the ones that are happening that we know about. All of the other little intricacies of how will that impact the U. S? How will that impact parts of the U. S. Market? So the fact that the markets again, you said it climbed a wall of worry, just when it comes to geopolitical events, and I feel like that's just an ongoing thing. That in and of itself can cause a lot of turmoil released internal, you know, fear of where are markets headed, if we fear bigger conflict, in the world.
[00:08:51] Ben Haas: Yeah. And so let's take that back to like the client level. Then I'm trying to remember the number of conversations we had last year where insert headline here, right? Geopolitics. There was a sell off in August. It was economics, politics, whatever it was, insert headline. This is giving me pause.
What do we need to do about it? And I realized those of those out there in the listening world that have worked with us long enough or plug into this podcast, we're going to sound like a broken record because the reality is I feel it too. The world feels heavy. People are going through things personally.
We're certainly tied to these things. We're not immune to what's happening out there in the world. But our response is almost always the same, right? We can't jump out of this plan. We can't leave the lifeboat when the lifeboat is there to keep us safe, even if we're taking on some water. And at some point., It'll be calm again, right?
The heaviness of what you're going through, the initial reaction can't be, although I get it, right? It would be completely rational to read a headline and say, I feel safer if I'm not invested. It would just be so incredibly expensive to jump out of that portfolio or make some big decision based on those headlines.
[00:10:10] Adam Werner: Yeah, and I know I'm guilty of this maybe in a negative way that you had kind of talked about there was that there was a very quick drawdown in August that was mainly triggered by a huge loss in Japan. They had a single day where they were down over 12%.
And then, of course, following day in the U. S. markets responded accordingly. We were down anywhere from, you know, two and a half to three and a half percent, depending on the index. Had I not gone back and kind of looked at that, I knew that this happened, but I didn't remember or feel the magnitude because that was five months ago at this point, and the market has felt good since then you kind of lose sight of all of these negative headlines that at the time felt awful.
Right. A 3 percent move in the market is big. And we just saw that recently with the whole AI thing over the weekend.
[00:11:00] Ben Haas: You and I, so that was a Monday. It's funny how I remember these things. Cause I remember I had to be out of the office at a church thing. And by the time I got back, I'm like, Adam, we got to, like, we got to do something about this.
Let's draft a communication for our clients and get ready to put it out in case this is like a bigger thing. And we put out that communication. And I know that you're going to know the answer to this. How many people replied to that? How many people maybe even read it? We don't know.
But zero people replied to it, right? Good, good on our clients to like, I hope they rolled their eyes at us going, yeah, we know we saw, but you know, long term investing, I'm not going to get overly worked up about it. Like that's what we need. We felt the need to react to it. And I don't want to say shame on us.
It's good to be proactive. We'll always be proactive communicators, but, I almost look back and hearing us talk about this podcast now, like I didn't follow my own advice of tune out that noise. Let's see where things go. And let's not overreact to it. And I feel like maybe I reacted to a 3 percent down day thinking my clients are going to freak out.
[00:12:01] Adam Werner: Well, and sometimes it is just the fear of contagion, right? It's, Yes, I understand that maybe this is just the one thing, but what if it turns into something bigger and that's where certainly we are not immune to that, but I think our communication would have been more along the lines of, we understand what's happening, it's not time to abandon ship, let's stick to the plan, this too shall pass.
[00:12:22] Ben Haas: The idea of talking now about AI and the presidential election and now a new administration, these are headlines that aren't going away this year,
[00:12:29] Adam Werner: right? Yeah, so that's a valid point.
There, you know, there was just, of course, there was a presidential election that happened. And of course, the campaign leading up to that, which certainly no matter where you fall on the political spectrum, you either felt good or you felt bad and you probably moved between those two feelings throughout the year.
And as we've, we talked about in a previous podcast, investing based on your political beliefs is usually not a long term strategy that will work out for you, right? Cause it's still the same. You're going to feel good when your party is in power. You're going to feel bad when it's not. And if you're making investment decisions based on that long term says, it really doesn't make a whole lot of difference in the grand scheme of things.
If the economy is growing, companies are profitable, and you're disciplined in your investments over the longterm, the market always reaches all time highs at some point. But yeah, we did have fears of an economic slowdown. I feel like we've been talking about potential recession for the last three years now, that has not come to pass So there again is just a perfect example of there were probably so many I was going to say opinion pieces. But there were articles written that are calling for recessions. It hasn't materialized that doesn't necessarily mean that well, I guess it does make them wrong, but in at the time it felt real. It felt like a possibility and that's not to discount you know, maybe the facts within those given articles, but to make wholesale changes to your investments based on any one variable is typically not the best way to kind of go about it.
And by the way, you have all of these things in 2024 and the S and P 500 hit an all time high. More than 50 times last year.
[00:14:19] Ben Haas: I don't know how many days the market was open, you know, so this isn't like 50 into 350, you know, it's not, it's less than that. That's like once every five, six days.
[00:14:29] Adam Werner: Yeah.
[00:14:30] Ben Haas: Yeah. Yeah.
So I guess. We could probably wrap this all up into one comment and it is to recognize the human element of our emotions. It's not to say, don't pay attention to the news. You know, don't have opinions on where you see policy going or, you know, what's important to your family and your friends and your beliefs.
But a lot of this news, a lot of the things that you will hear, read, tune into on whatever channel or network you listen to, those are not important inputs into your financial plan.
[00:15:01] Adam Werner: Yeah.
[00:15:01] Ben Haas: Savings, taxes, diversification. These are things we need to pay attention to, not whatever biases we may have about, you know, the lens that we see the world through.
[00:15:13] Adam Werner: Yeah. And I think your point there is valid. It's not to completely discount the feelings on, you know, certain variables in, in headline news, but it should be a conversation, right? Because I know we've talked about this before. There are so many moving pieces, that go in, or inputs, that go into, okay, is the market up, is the market down at any given point in time, and it's impossible to wait those things to know, well, but this piece of information is really going to have a big impact and this information, ignore that.
Don't worry about that little piece of information. It's very hard to kind of parse out what's truly impactful and what's just noise. And more often than not, it is mostly noise. And it's, I think that's where it's good to have hopefully an advisor, hopefully a planner to kind of lean on, have those conversations.
Let's talk through what those headlines are that may be worrisome and try to put it into context for that person's plan. And does anything need to change based on the positioning?
[00:16:16] Ben Haas: Yeah, it's like I almost want there to be this panic button for anybody that, it feels comfortable knowing it's there, but that panic button is in a different room.
I'm in that different room, ready to chat with you. And then beyond that room is where the panic button is. And if it needs to be, I will push it together. It's like the visual I want of it's okay. Like we are human. We feel the weight of all of it. And I promise you and I are empathetic. Like we feel it too.
We have a lot of these conversations. I'll walk around this door. Over to the other side of this wall where you are, and we'll have these conversations, and nothing will come of that other than I needed to share how I was feeling. You needed to share how you were feeling and we decided together, we don't need to act on this.
But I hope, especially if somebody is out there that is really feeling uncomfortable about something. It can be AI, it can be changing the, whatever it is.
[00:17:13] Adam Werner: Yeah.
[00:17:13] Ben Haas: Have your advisor, have your plan. Don't have that panic button too close to yourself.
[00:17:20] Adam Werner: Yeah. Yeah. And so I'll just put a bow on it by saying, I'll reiterate what you said there.
The amount of times we've had those types of conversations. And we get to the end of it, and it's just, I feel from a client perspective, I feel so much better just having this conversation. I feel better just being able to get it out of my brain, right? Get it off of my chest. And have a reasonable conversation to just feel like somebody else is watching this.
I'm not on my own.
[00:17:50] Ben Haas: Right.
[00:17:50] Adam Werner: And that I feel better just to talk these things out. And I will feel much better when we get to the end of that conversation. So yes that in and of itself can go a long way to giving some peace of mind, or at least hopefully giving some perspective on where we're at, where we see things going.
And if we do our job, and if the clients are kind of on board with structuring things in a way, like the whole bucketing theory to buy yourself time to ride out those negative headlines when they are happening.
[00:18:19] Ben Haas: We're here. If we have to be that sounding board, we're happy to do it.
[00:18:23] Adam Werner: Definitely part of the job.
[00:18:24] Ben Haas: That's why you have us.
[00:18:25] Adam Werner: Yep, exactly.
[00:18:26] Ben Haas: All right, pal, tune out the noise. Best we can. You got it. Second time around on the chiefs. Let me ask you just so it's like now recorded.
[00:18:36] Adam Werner: Oh man.
[00:18:38] Ben Haas: Can they do it? Are they going to do it? What's your prediction?
[00:18:41] Adam Werner: I don't want to jinx anything, but I feel good.
[00:18:46] Ben Haas: That's all. That's all I ask. Let's be optimistic going into this. I feel good.
Alright pal.
[00:18:53] Adam Werner: We'll follow up in a couple of weeks.
[00:18:55] Ben Haas: Yeah, well, they'll know by the look on our face by the end of that week. All right. Thank you. Thank you for this. This is important. I do believe this is going to be something we're all going to work through together.
[00:19:07] Adam Werner: For sure. All right.
[00:19:09] Ben Haas: Next time. Bye.
[00:19:11] Adam Werner: Bye.
Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.