Nod your head if you’ve recently clicked on a headline because it included the words recession, crisis or bubble.
Nod your head if that article made you feel nervous, fearful or the need to change your existing investment mix.
Nod your head if you discussed or shared that article with friends, family or colleagues?
If you nodded your head to any of the above, you’ve potentially fallen victim to “click bait”, a term used to describe a sensationalised headline designed to grab your attention, so you click on a link to another page. The article is usually unrelated or less dramatic than the headline purported and surrounded by targeted and personalised advertising; the advertiser pays a publisher when the ad is clicked in what’s known as the “pay-per-click” model.
So why are newspapers deviating from the physical print model?
We’re at a time where the writing’s on the wall for some print media, with demand for today’s physical news/tomorrows fish ‘n’ chip paper waning year on year. So news outlets have had to find new ways to generate revenue using the internet, a crowded platform full of free and not necessarily accurate information.
With so much competition, headlines need to GRAB and ATTRACT you to their sites and the best way for them to do that is to print hyperbolic or negative headlines because that’s what we pay attention to.
Why do we love bad news and how can it affect your investment?
Humans have a variety of cognitive biases, one being negativity bias, which means we have a tendency to focus more on negative information than positive and this can have a powerful effect on our behaviour and decision making. Overlaying that is our confirmation bias, a tendency to selectively pay attention to information confirming our existing beliefs or fears and discount evidence to the contrary.
One of the biggest risks when reading these sorts of articles is that you talk yourself into believing the next downturn is imminent or a crisis is coming, and you prematurely act on that belief.
A material change to your investment strategy should not only be the result of an article you read on the internet or a story you were told 1st, 2nd or maybe even 3rd hand from a friend.
Changes to your investments should be in response to a material change in your life; getting closer to retirement, a recent asset sale, your children no longer being financially dependent on you (if that’s such a thing) and so on.
We invest so much time in researching managers before deciding who to trust with our savings, being careful to avoid those who don’t have our best interests at heart, so shouldn’t we invest in quality journalism too?
Take a moment and think, before you click on that link.