Vetting Your Sources of Financial Advice

“Good advice rarely changes, while markets change constantly. The temptation to pander is almost irresistible. And while people need good advice, what they want is advice that sounds good.” – Jason Zweig

Working in the investment industry and writing on this website means I get a decent number of people asking to me about the markets and their portfolios. Many want to run by me a piece of advice they’ve received from a newsletter, a financial TV show or somewhere on the Internet.

Most of the time people are looking for reassurance that their advice is sound instead of looking into possible problems or common sense alternatives. No one really wants to hear about long-term principles. Most want short-term tactics.

Should I buy this stock? Should I go to cash? Is it time to buy bonds?

Instead of doing a deep dive on every stock pick or market timing call that gets brought to my attention, I usually ask about the source of the information. Since it’s impossible to predict the future, any time you get financial advice you should really be vetting the source of that information, not just the specific tactic itself.

Here are a few things to consider when taking financial advice from any source.

Avoid context-driven, very specific advice. Try not to be context dependent.  Most tactics are useless in a matter of days or weeks.  People in the media have no idea about your precise circumstances, risk tolerance or time horizon. There’s no way they can give you the exact move to make every step of the way. Use this as a form of entertainment and knowledge gathering, but that’s as far as you should take it.

Look for advice that will help you understand instead of telling you exactly what you absolutely have to doThings are slowly changing in the financial media as more level-headed people are being given a platform. There are more sources out there that offer perspective about the markets and investing than ever before. It used to be just stock picks and economic predictions galore. But there are still click-bait stories that try to grab your attention with the 10 Things You Must Do RIGHT NOW!!!  Again, with no direct knowledge of your situation, the best someone can do is tell you what they are thinking, not what will work for you.

There are no perfect investing systems.  Fool-proof strategies don’t exist so stop looking. The markets are cyclical and so are even the very best investment strategies.  It’s a waste of your time and energy to continually search for the perfect portfolio or investment.

Beware people peddling investments that have increased substantially in price recently. More than likely these people missed the entire ride up and are trying to cash in while the getting is still good. It could be gold, real estate, stocks, whatever. It’s much easier to jump on the bandwagon after an investment or asset class has shown huge gains.

Complexity and fear mongering make for good headlines but usually bad advice.  Yes, manias and panics do happen. But the next big one isn’t always just about to hit.  There are always issues to deal with and there is never certainty in the outlook.  Markets fluctuate, but that doesn’t mean every time they drop it’s going to be a crash or every time they rise we’re in a bubble.

The higher the conviction someone has in their short-term forecast, the less you should listen to them.  Beware those with complete confidence in their view of an unknowable short-term future.  Some prognosticators are more concerned with sounding right than making money.  No one knows what will happen.

Here are some words and phrases that should give you pause when you hear someone making an economic or market-based prediction:

It’s a sure-thing
Too much uncertainty…
I would have been right if it wasn’t for the Fed
I’ve been reading the tea leaves….
This stock is the buying opportunity of a lifetime
We think it’s a second half story…(HT @michaelbatnick)
We’re cautiously optimistic…
The coming apocalypse…
A new paradigm…
We think it’s the next Google…
It’s setting up to be a stock-picker’s market…

Look for balanced opinions that look at both potential rewards and potential risks.  Balanced advice looks at both sides to give you pros and cons. What could go wrong? What is it that I’m not seeing? What are the risks I’m taking to get these potential rewards?  It’s an underrated trait to see both sides of a debate when giving advice.

No one is perfect, especially in complex systems such as the financial markets that are mostly controlled by human emotions. Look for sources of information that are willing to admit mistakes. Self-awareness and humility are two huge attributes that I look for when parsing my financial advice. It’s impossible to tell whether you are getting legitimate advice if the person avoids holding themselves accountable for their recommendations.

And remember, you’re not going to find the advice that’s perfect for you in every situation. Try to find sources of financial advice that (1) keep you interested in the subject, (2) give you a history lesson on the various risks involved in the markets and (3) help you understand the potential biases in your process.

From there it’s up to you to make your own decisions based on your personal circumstances.


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  1. Barry @ Moneywehave commented on May 07

    As someone who works in media I totally agree that investors should really think about where the info is coming from.

    A lot of the info we pass off as news especially when it comes to investments usually comes from a press release from the company it benefits. Obviously a bank will always push their own products and often we’ll bite and report it as news.

    The reason this happens is because most people who work in media have no clue about business/finances and just accept it as truth.

    • Ben commented on May 08

      Thanks Barry. I appreciated the insider perspective and honesty. At the end of the day media outlets need eyeballs and numbers. Not an easy thing to do but consumers need to be able to tell the difference (as you said).

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