It’s always prudent to stay abreast of what’s going on in the financial world but it’s also important to understand that the information you get from the media isn’t completely unbiased. We live in a day and age where drawing viewers, readers, and listeners is as cutthroat as ever, and that leads to media coverage that isn’t always direct and transparent.
That’s not to say that the intent is malicious or the goal is to deceive the consumer, but there are certain types of bias that we all need to be aware of because it could impact the decisions we make with our finances.
Let’s start with sensationalism. This has always existed in the media but it seems like this strategy has accelerated with the rise of digital media and the ability to access information instantaneously. In cable news, the goal is to get more viewers and keep them watching for as long as possible. In the internet world, it’s all about getting people to click on your site.
This often leads to overly-dramatic pundits on TV and sensationalistic headlines on the web that don’t necessarily reflect the reality of what’s going on in the world around you. So while it might seem like most outlets are doing their best to inform you, remember that in many cases their main job is to entertain you.
Another form of bias in financial media is paid placement. Sometimes a TV show will feature a certain company or a magazine will write a favorable review of a particular investment, and you’ll assume that it’s unbiased journalism. But the reality is that this might be content that the company has paid for.
Even if it’s not directly paid for, a company could still receive more favorable coverage because they’re an advertiser. Money talks and sometimes it keeps people from being as objective as they should.
That takes us to another form of bias, which is when someone has an axe to grind. Suppose you’re listening to a stock market analyst on TV and he’s asked about Apple stock. He says that it’s likely to dip soon and it’s a good idea to sell. What if he just had a bad experience in the Apple Store the night before and he has a sour taste in his mouth about the company’s future because of it?
Since you never really know someone’s motivations in a situation like that, you shouldn’t take their advice at face value without further investigation. That goes for both the good and the bad.
The final bit of bias that occurs in financial media is a bit different from the others. This one falls more on us as investors rather than the outlet, and that’s because we’re the wrong audience. The financial advice that’s being given might seem to be applicable to us but it’s really intended for a different audience.
It might not be bad advice…it’s just that it’s intended for someone else. For instance, you might hear someone talking about Roth conversions and how valuable it is for people to convert their retirement savings to Roth. If they’re 35, that might be a great tip for them. But if you’re 65, it may or may not be a great thing for you to do.
We always want to err on the side of caution when we’re getting any financial information or guidance from any form of media. It’s going to benefit you much more in the long run to build a relationship with a financial professional and rely on them for help navigating the challenges of money and planning.