Most of the time when we think of noise, we may consider horns honking in traffic, the noise of a coffee shop or the neighbor’s barking dog. We seldom think of the content of information as noise – but we should.
Noise can be a nuisance. But it can also be dangerous to our well-being when that noise represents variability that is beyond our control.
Noise in the investing realm often has to do with media headlines, concerning forecasts and short-term market movements. All things that change often and we cannot control.
Paying attention to such noise can have significant downsides. Investors that watch the financial news and markets often experience increased stress, sleeplessness and worry. News headlines and market moves are mostly noise in the short term. We can mute the noise by taking a long-term view.
Since 1926, the S&P 500 Index is positive only 56% of the time when measured daily. But when we extend our time horizon, we find the S&P 500 is positive 75% of the time in one-year periods and 95% over ten years.1
It is in your financial best interest to identify and ignore the noise of news headlines and short-term market outcomes. Focus instead on playing the long game. I’m here to help you do just that.
1.Source – Dimensional Fund Advisors
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All indices are unmanaged and may not be invested into directly.