In the ever-changing scenario of financial markets, the role of news and media in shaping how investors feel and make decisions is immensely significant. The continuous flow of information greatly influences the actions of both individual and institutional investors, often causing swift movements in the market.We need to understand how sensationalized financial news and media coverage affect your behaviour as investor and also i suggests ways to maintain a balanced viewpoint.
“The effect of news and media on how investors act is something that cannot be overlooked”
Markets very much are sensitive to news, and investors like you and me rely on the most recent updates to make informed decisions.The manner in which news is reported has evolved, with sensationalism increasingly being used to captivate audiences and encourage actions .This tactic often highlights outcomes that are either extremely good or bad, thus presenting a scenario that might not accurately reflect the core principles or the overall market situation.
Some of the examples :
#1 : The share price of UNITECH was approximately INR 15 in March 2006, and it surged to INR 520 by January 2008 due to a variety of market factors, only to fall back to around INR 44 within the same year.
#2 :Numerous paper companies listed on the stock exchange teamed up with various media platforms attract investors by hiring individuals to artificially inflate their stock prices, engaging in what’s commonly known as pump and dump schemes.
#3 : Late in the year 2023 , SEBI cracked a telegram channel that circulates buy / sell messages on penny stocks thus impacting the stock price.
What you need to do :
To mitigate the effects of sensationalized news and keep a balanced outlook, investors can adopt several strategies:
Diversify Sources of Information: Depending solely on one news outlet or financial analyst can lead to a biased perception. It’s advisable to broaden the sources of information to include diverse viewpoints, even those that may counter the prevailing sentiment. Eg: Cross verify the information with other sources and known facts
Concentrate on the Basics: Base your investment choices on fundamental analysis, including a company’s performance, industry trends, and economic indicators, instead of reacting to the emotions stirred by news reports.This method favours decisions that are aimed at long-term benefits over reactions to short-term news cycles.
Establish and Adhere to an Investment Plan: Having a well-planned investment strategy that outlines clear objectives, risk tolerance, and time frames can act as a guiding light, helping investors navigate through market volatility.
Practice Emotional Discipline: Recognizing and controlling the emotional reactions that news can trigger is crucial.
“Taking a moment to step back or allowing for a cooling-off period before making investment decisions can prevent hasty actions driven by sensational news.”
Use Technology Judiciously: Although financial news apps and alerts offer up-to-the-minute information, setting filters to highlight relevant news and avoiding excessive checking can help minimize the urge to react impulsively to market “noise.”
Seek Advice from Experienced : For those who struggle to separate emotion from investing, consulting a financial advisor can offer a safeguard against the temptation to make decisions based on sensational news.
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Thanks
Srikanth
