Louise Cooper/ Financial journalist
RP: One of the places that people look for information when making
investment decisions is the news media.
But, with its inevitable focus on stock market volatility and where markets
might be heading, the media can distract you from what you really need to
Louise Cooper is herself a financial journalist.
LC: You can’t predict what a market is going to do, you can’t. And if you miss
out on the big up days, it seriously impacts your long-term performance. What
those two facts tell you: buy and hold. Buy and hold. Buy every month, pound
cost averaging, every week, whatever it is. Pound cost averaging, buy
regularly, that is the way to do it.
So ignore what the news tells you, follow the academic research. Buy and
hold regularly, save, put your money away. Forget about what the market
does – it’s interesting from a news perspective, utterly irrelevant from an
RP: That’s not to say you should ignore financial news altogether.
It can be very interesting. But you certainly shouldn’t let it guide your
LC: So I consume the news, I look at share prices, I look at what’s going on. It
has no impact whatsoever at all on how I invest. At all. I look at the
economies, I look at the markets, I look at all of it. It does not stop me doing what I do,
which is, every month money goes into my pension, every month money goes into
my children’s, you know, future
savings, every month money goes into my husband’s pension. We don’t
change the fund we’re in, we’re always in the same fund.
I read it all, I find it fascinating, I love it – no impact on how I invest at all.
RP: Another problem with the financial media is that low-cost, passive
investments receive far less attention than actively managed funds.
The main reason for that is that the active fund industry spends huge
amounts of money on PR and advertising.
LC: The other thing I don’t think the media truly understands is that passive is
not trying to blow the lights out. Because you blow the lights out one year and
have amazing performance but then the next year, you have terrible
performance, that’s how active works, generally, ok?
So in any given year, passive is very unlikely to be one of the top performing
funds. But it doesn’t need to be. That is the point. Average, year after year
after year after decade after decade, will blow the lights out over forty years.
You don’t need to blow the lights out. The whole point in passive is that it’s
never going to make the top of a performance chart because it’s not what it’s
trying to do – it’s not what it needs to do. So that’s another thing, ignore
performance charts for funds, and yet they are everywhere.
RP: In short, financial news might be entertaining.
But, from an investment point of view, it’s not as useful as you might think.