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We expect facts not speculation from financial journalism

Sensational, doom mongering or out and out fantasy – sums up most of the personal finance content in newspapers, says Noel Farrelly, director of Index Wealth Management

One of the duties I assign myself is to read a wide range of newspapers, particularly personal finance and business sections. These newspapers include The Times, the Telegraph and the Financial Times; you might expect these newspapers to provide high quality, factual information that will be useful to us and in turn, to our clients.

My experience is pretty mixed. There is some useful content, in particular in the Financial Times, but most of the content regarding personal finance and markets is either sensational, doom mongering or out and out fantasy, perhaps fulfilling journalists’ constant quest for “an angle”.

There was a particularly egregious example published in The Telegraph on 7 January 2015. Click here to read the full article.

Let’s start with the headline: –

“Panicked savers sell more shares than in 2008 – so is it time to buy?”

There are two aspects to this headline, the first containing some useful information, which I could barely believe. It would appear that once the FTSE 100 started to fall from the start of September, which continued until the middle of October, private investors unloaded shares at a rate greater than in 2008. This, according to Capita Asset Services, was the largest sell-off with any three month period since they started compiling the data in 2006. Capita’s chief executive, Justin Cooper, explained it by saying that, to quote the article, ‘private investors feared the worst and took fright on a scale far beyond that which greeted the Lehmans crisis and subsequent global depression’.

So no real surprise there, human nature hasn’t changed and people will panic and sell at the most inappropriate times. But it did surprise me that the sell-off was bigger than at the time when it would appear many people, including senior politicians, believed the banking system was about to collapse.

The second part of the headline is an example of the kind of rubbish that dominates these articles. Personal finance journalists and an increasingly small number of active fund managers are the only people in the world who seem to believe you can time markets. As Burton Malkiel once famously said, “I’ve never known anybody who can time the market. I’ve never known anybody who knows anybody who can consistently time the market.”

There is only one good time to get into the market and that is when you have the capital available. Trying to decide whether the market is high or low, or whether the prospects are good for the coming year or two is futile. Yes, the market may drop shortly after you’ve invested. But, as it has proved, time after time, the drop will be temporary and long-term growth is assured.

The article goes on to tell us that the best time to buy is when “the herd is selling” and seems to believe that professional investors never sell. “Some of Britain’s most respected fund managers”, they tell us, “were buying toward the end of the year as their target stocks became more attractively priced”. Somebody should tell these journalists that fund managers are always buying for two reasons; new money is coming in or they have sold some stock and need to buy more. The latter strategy, of course, merely increases expenses.

We are then told that several Investment Banks have predicted the FTSE 100 will end the year above 7,000 in 2015 and not only that, Telegraph Money readers are also upbeat! How very reassuring for all of us. Apparently this comment is based on the responses of more than 5,000 people who voted in their poll. Whilst as an investor, you should be optimistic, making predictions is a mug’s game. And whether or not the FTSE 100 goes up next year, much more important is that investors have a global spread of investments and the wisdom to know that markets go up and down on a daily basis and nobody knows what kind of day tomorrow will be, never mind the coming year.

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