BUY, BUY, BUY, SELL, SELL, SELL…
Should you watch CNBC? CNBC is a great resource for picking up news nuggets for what’s happening around the world. It’s a combination of 60 Minutes, ESPN and Jerry Springer. While I’m at work I have it on in the background but I listen to it with a heavy set of filters.
CNBC is a news channel with anchors jumping from story to story in rapid fire session giving the viewer a constant account of the global markets. The best (worst?) part of CNBC is when their guests square off and battle over the market, the economy or a stock pick. The opposing parties attack each other and talk over each other while trying to convince the audience their opinion is right.
On any giving day you may hear hundreds of stock recommendations. These recommendations are not selected for you but for the general population. The producers of the show don’t care if you buy Twitter at the bottom or sell Amazon at the top. They want you to watch their show so they can sell more advertising for their parent company NBC Universal.
It’s rare to hear an anchor or commentator tell you to purchase low cost index funds based on your personal financial plan and hold it forever. The buy and hold index investor gets little love from CNBC. The active trading hedge fund manager sells more advertising than a buy and hold passive index fund manager. Does this make sense? According to S&P’s SPIVA® U.S. Scorecard over a ten-year investment time horizon 82% of large-cap fund managers, 87% of mid-cap fund managers and 88% of small-cap fund managers underperformed their corresponding benchmark. The benchmark is usually a low cost index fund that you can purchase.
News travels faster than you can trade. By the time you hear the news about your favorite stock the market has already reacted. It’s impossible for you to enter an order fast enough so don’t bother. The best thing for you to do when your stock is mentioned is nothing. If your stock is mentioned take some time to review the headline and then do your own homework before you react.
Don’t buy a stock just because it’s highlighted on CNBC. The people on CNBC know nothing about your personal financial situation so if you feel compelled to act on their advice it’s best to count to ten and then call your advisor who is familiar with your investment portfolio.
Fear sells and down markets make big headlines. When the market is going down, which is normal, panic mode sets in and the anchors want to know if this is the beginning of the end. Market drops appear to pick up steam as a result of the broadcasts. I’ve yet to see a fire put out with kerosene.
CNBC can be a valuable tool if used correctly. It’s a news channel so use it accordingly and always default to your financial plan. Do not make any rash decisions because BUY, BUY BUY is usually replaced with SELL, SELL, SELL.
Where there is no vision, the people are unrestrained, but happy is he who keeps the law. ~ Proverbs 29:18
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www. parrottwealth.com.
August 10, 2016
 2015 SPIVA® U.S. Scorecard, S&P Dow Jones Indices, Aye M. Soe, CFA, Senior Director, contributor.