Avoid information overload when learning how to invest
Prior to online trading, the iPhone and the internet superhighway, the most common question I was asked by investors was how to find the best stocks to buy.
Interestingly, despite information moving at lightning speed these days, nothing has really changed given that I am still asked the same question today.
In the 1990s, investors would share how their biggest challenge was information overload, given that they were bombarded with newsletters, the media, brokers and other resources. Little did they know that the information tsunami was coming, because now it is infinitely worse.
As a consequence, investors have become even more confused resulting in many opting to invest in an Index Exchange Traded Fund to ease their confusion.
So how do you find the right stocks without having to trawl through loads of information?
In my experience, and some of the best advice I can give investors is that “less is more” and in today’s fast paced information flow, this is even more critical than it was 20 to 30 years ago.
Unfortunately, both investors and traders mistakenly believe that the more information they receive, the better their decisions will be with many checking stock prices on their mobile phone and buying and selling stocks multiple times a day.
In my opinion, this constant immersion in information leads investors to make reactive decisions based on emotion rather than logic.
I am pretty sure everyone has seen at least someone have an accident of some sort while they were walking and immersed in their mobile phone. This occurred because their attention was on the phone rather than the bigger picture of what was happening around them. The same can be said for the stock market, as it is very easy to get caught up in the moment when you don’t have structure around your investment decisions.
There are some simple strategies you can use to guide your way through the virtual mountain of information.
Therefore, the first thing I recommend all investors do is limit themselves to one or two very trusted sources of information and only look at this on the weekend when you have more time, you are relaxed and can absorb the information.
This will lower unnecessary stress levels, give you more time to focus on what is important, and will ensure you make rational rather than knee jerk reactions when reviewing any market news.