Beware Of Sound-Bite Investment Advice

You've probably noticed how investment advice comes packaged in sound-bites. Whether it is talking heads on television or articles in magazines, newspapers or the Internet, the implied assumption is you have the attention span of a two-year-old.

The problem with packaging investment advice into sound-bites is it tries to convert something that is inherently complex into something simple. Investing is complicated. People get advanced degrees and train entire lifetimes to succeed in this profession yet still fail miserably – remember the debacle at Long Term Capital Management run by Nobel Laureates and PhDs in finance? They had the highest education possible and they still blew up.

So why does the investment media package their investment advice into over-simplified sound-bites? 

The reason is simple. The investment media's job is to maximize their revenues – which they achieve by maximizing viewership. They seek to grab your attention with catchy titles and flashy sound-bites that entertain and amuse you because that is what attracts an audience. It's all numbers. Notice that it has nothing to do with dispensing quality, profitable investment advice. It has nothing to do with maximizing your profits, but everything to do with maximizing their profits.

The truth is the investment media is in the entertainment business – not the investment advice business. Entertainment is how they maximize profits because that is what people respond to. People want to be entertained – not educated. Pathetic, but true.

I don't know about you but when it comes to investment advice I care about one thing and one thing only – profitability. If the investment world is complex and requires complex analysis to do the subject justice then that is what I want. I don't want my investment advice dumbed down and reduced to mundane entertainment. That is why I don't watch CNBC (or any TV for that matter) and why I don't read investment magazines. It is mundane, passive entertainment and has little to do with profitable, active investing.

I just published a new article that examines the problems with over-simplified, free investment advice. It discusses the thin gray line separating blatant investment fraud from the deceptive half-truths dispensed by traditional investment media. It even lampoons the sacred cow of the investment world – buy and hold – to illustrate the dangers of over-simplified investment advice.

In short, I think you will find it an interesting read. You can get this new article here.

I hope you enjoy it.