Is the Financial Media a Trustworthy Source for Investing Information?

At NEST we take pride in providing data-driven investment management for our clients. But where does that information come from? What data sources are trustworthy and unbiased? Do we just follow what the financial media says?

As we mentioned in another blog post, asking a potential financial advisor where they get their intel is one of the most important things to ask before hiring them. 

We’ve made no secret that at NEST we view financial media outlets as unreliable and biased sources of information, unfit to base your investment strategy on. We don’t use them, and we strongly encourage our clients to avoid them as well. 

But when we say, “financial media,” who do we mean? And can they really be that bad?

Read on and then decide for yourself.

 

Financial Media – What is it?

The financial media is any media company or subset of a company that focuses on financial news, including investing, the economy, and personal finance.

Examples of financial media companies are CNBC, Bloomberg, Fox, Motley Fool, Reuters, Yahoo Finance, Barron’s, Market Watch, and The Street, to name a few of the most popular.

 

What’s the problem with financial media?

First and foremost, they are media companies. 

And ahead of making you money with your investments, their priorities are to attract and keep your attention, sell advertising space, and be profitable in one way or the other to the companies that own them.

So, let’s emphasize what they are and aren’t:

They are: media companies that focus on financial news.

They aren’t: unbiased, financial research firms that offer free advising services or content. 

We cannot forget that financial media companies are in the business of selling your attention to advertisers. That’s their bread and butter, their whole business model. This is critical to consider. Why? Because they’re going to cover things that sensationalize the market, sexy things that keep your attention, things that benefit their advertisers, ensuring that continued revenue, and things that raise their company’s bottom line. 

 

Who the financial media really work for

They are beholden to the companies that own them, and the advertisers that pay the bills. Not to you or your portfolio. This situation is ripe for bias and conflict of interest.

You can’t get the complete picture of what’s happening in the market from financial media. What you do get is biases, because they choose to cover what sells. 

In short, they cover what makes them money, not you.

Imagine this scenario. A hedge fund representative goes on one of these financial media outlets. They tell selective or distorted truths, or even outright lies. The audience consumes this information on good faith and buys stocks based on their recommendations. The value of the stock increases, as planned, because people are buying. The hedge fund watches their own stock grow, then gets out. They make the money, and everyone else is left holding the bag. 

That hedge fund representative had access to good information. The financial media outlet did as well.

But what they give you is the information they want you to have.  

Surely this sort of thing is illegal, right? Of course it is. It’s called “Pump and Dump,” and it’s illegal based on securities law. It’s also really hard to catch. So it happens, and it’s easy for  financial media companies to be complicit.

Because of so much opportunity for bias, self-interest, and the simple fact that their audience is their product, we do not watch, read, or listen to financial media. 

Instead, we go to sources of pure research and data. 

 

Financial Media – why do investors and firms use it?

If financial media is so bad, why do so many investment managers and firms still use it? There are a few possible reasons:

1. They don’t know there’s an alternative. Believe it or not, differentiating between good and bad sources isn’t usually taught in college or certification programs. And the fact that many financial advisors don’t even come from an educational background in finance only exacerbates the problem. Unless they had a mentor who showed them the light, it could take years of close observation and study before they suss it out for themselves. 
2. They’re not building their own models. Many advisors and firms use off-the-rack portfolios, so a deep dive into unbiased information isn’t really worth the time. It takes hours each day to sift through the research and data. If they’re not actively managing accounts, why bother?
3. They wouldn’t know what to do with the data if they did look at it. This comes from a lack of understanding of investing as it relates to the global economy at a macro level. And because one doesn’t have to have a background in finance to obtain most credentials, poring over the data and interpreting it can be beyond their capability. Taking opinions from financial media personalities is the easier, and perhaps only option.
4. Pure laziness. It’s sad but true. 

 

What we do at NEST

If we hadn’t made it abundantly clear by now, we do not rely on financial media for any of our information. We hate it, and we don’t trust it. 

Not only that, we strongly encourage our clients to follow suit. If you follow financial media, you’re likely to be misled. What you’ll often find there is bad, biased, and possibly harmful stories that will just distract you from what the data says. 

At NEST, we pay for our data, which we get directly from research channels — people who don’t do any money management. All they do is research, analyzing the economies of the world. And that’s what we buy from them.

Companies like Hedgeye that offer quality, unbiased investing research, are not selling ads. They’re selling their product — the research their analysts perform. The quality of the product pays their bills, not selling your attention to the highest bidder. 

As Sean has said before, if it’s free, it’s shit. And if you aren’t paying for it, you’re the product. 

At NEST, we buy the data and the research. We spend hours each day consuming and analyzing it. We use it to build and modify our portfolios. 

 

It’s as simple as that.

But it isn’t easy. It takes a lot of knowledge of how the markets and economies work at macro-level, and it takes a lot of experience managing investments in every type of economic climate. And that’s what we do to ensure our clients’ assets are optimized in any weather. Kind of hard to do if you’re getting a faulty weather report. 

If you’re ready to break away from the financial media herd and work with experienced investors who not only go straight to the data, but also know how to use it, reach out to us to schedule a no-obligation call.  We are an Austin-based financial firm, and we are passionate about helping you achieve your financial goals through sound financial planning and active, data-based investing. Let us help you optimize your assets, maximize your returns, and build your dreams. 

 

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DISCLAIMER: We are legally obligated to remind you that the information and opinions shared in this article are for educational purposes only and are not financial planning or investment advice. For guidance about your unique goals, drop us a line at info@nestfinancial.net.