How to Read Financial News
By Morgan Housel
(Originally published at Motley Fool in November 19, 2012)
The amount of financial news published these days is staggering. The volume of news and analysis could drop 90% and it would still be completely overwhelming.
How do you make use of it all? As a financial writer who spends an embarrassing amount of time sifting through news, here are a few things I've come to terms with.
Read things you know you're going to disagree with
There is so much media content today that you can always find someone who agrees with you. Bullish on Apple (NASDAQ: AAPL)? Thousands of writers are, too. Think the government is a giant conspiracy? There are countless blogs for that. Think the global recession was caused by celestial bodies falling out of alignment? I'm not kidding, folks–there are blogs for that (and I'm doing you a favor by not linking to them).
The huge diversity of opinions makes readers vulnerable to something called confirmation bias. It's when you start with an answer, and then dig for information that backs it up. It's really dangerous because once you find someone else who agrees with you, you become more convinced that you are right — even though you can find someone who agrees with you about literally anything.
In investing, Berkshire Hathaway (NYSE: BRK-B) Vice Chairman Charlie Munger advocates the intellectual approach of Charles Darwin, who regularly tried to disprove his own theories. I'd recommend doing the same with financial news. You will probably learn the most from people you disagree with. They cause you to challenge your existing beliefs, many of which may be driven more by emotion than by fact.
Picture via Pixabay.
