Separating Signal from Noise

There is more financial news every day than anyone could read, and most of it will not matter in a month. Here is a simple filter for deciding which headlines deserve your attention and which ones to ignore.

Most news is noise

Daily market commentary tries to explain every wiggle: stocks fell because of this, rose because of that. Often those explanations are written after the fact. For a long-term investor, very little of it changes the value of a good business. For a trader, reacting to every headline leads to overtrading and emotional decisions.

Chasing every headline pulls investors through the emotional cycle of fear and greed.

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