Monday, January 30, 2006
The Truth about Business Television and Personal Finance
Television provides its viewers countless viewing options. While some people are happy to spend countless hours watching pointless sitcoms, the truly rich and successful are spending their time getting inside information on the financial markets by watching their favourite financial news station…At least, that is what they want you to believe.
Today we will look at financial news networks and how they are both beneficial and destructive.
When a person is just starting to get into investing, they might believe that a good first step to take is to start watching financial news stations in order to get an understanding of the market. While this can be beneficial, it can prove to be detrimental. This does not mean that you should avoid financial news stations at all cost, but there are several things you should always keep in mind while viewing them.
Personal finance has never been easier for individuals to control. Discount Brokerages and the Internet have provided the individual with all the knowledge and power needed to take total control of their finances. This power is both a curse and a blessing because if one does not control their personal finances properly, they can be taken advantage of. This needs to be kept in mind; even when dealing with the discount brokerages themselves. These brokerages make the majority of their money from the fees they charge for each transaction an account holder makes. As a result, discount brokerages motivate customers to trade aggressively by making many transactions. They do this because the discount brokerages are making the most profit off of customers who are frequently trading and therefore are frequently paying trading fees.
Now you may be wondering how all of this ties into financial news channels. There are not any discount brokerages that actually own a business television station, but they do relate in the way they make profit. Simply put, the more you use (or view) either of their products, the more money they earn. Business television stations are businesses of their own. For example, NBC Universal (which is partially owned by General Electric) owns CNBC. The station makes money through advertisements. Advertisement fees are correlated to the amount of viewers that watch (on average) at a specific time. This means it is to television station’s advantage to be on the air as often as possible, and to get as many viewers as possible, in order to be able to charge more money for advertisement space.
A major issue with financial news stations is their actual program content. As previously stated, these stations benefit by getting the largest audience to watch their station as possible. Financial news stations have gained large audiences by turning the stock into a game. Sometimes it’s a numbers game and the program throws a variety of ratios and nominal values to verify an opinion of a stock. What does it really mean that a new publishing house IPO projects sales of 1.2 million books within five years? More often, it is a timing game, or a race against the clock. Investment advice stands for “right now” only. If a station suggests buying a particular, they mean buy NOW (and tune in tomorrow to find out when to sell). Even the language these stations use make the stock market sound like a game. Stocks do not increase or decrease in dollars, but in “points”. Every day ends with a focus on the biggest gainers (the winners) and the greatest losers. With all of this constant, ever changing information, how can anyone not watch these stations all day? The financial new stations have found the best way to keep audiences tuned in and these programming trends are here to stay.
The problem with this style of programming is that it takes out one of the most important aspects of investing, patience. How can anyone feel good in their own investments when they are constantly bombarded with stocks ideas that are going to be “the next best thing” on a daily basis? Furthermore, when an investment one is invested in is mentioned positively on one of these networks, the investor is likely going to become overly optimistic with their holdings, staying in their investment longer than they would have originally. Holding onto a stock for too long is just as detrimental because it goes against your original, unbiased strategy. The longer you hold, the more you stand to lose. If you are in a situation where you are holding a stock simply because you hope it increases in value, you are no longer investing. You are instead gambling, which in the long term makes losers out of everyone. Personal finance is not about gambling.
Unlike what these business television networks would like you to believe, investing is not a game. What the discount brokerages don’t want you to know is that you can make money without having to constantly trade into new stocks. By doing your proper homework and having a long-term plan in mind, you can make sound investments that require little supervision. This does not mean your investments should go unmonitored, but it is unnecessary to be checking them everyday. In fact doing this will just make it harder for you, as you will want to lock in any profits you have secured or may be frightened by a slight loss. If you have done your proper research and are properly diversified, selling at a slight loss or gain will definitely cause you to miss out on larger future gains that you would receive by patiently staying in these investments.
Business television is also famous for the amount of “experts” they have on. The viewer needs to realize that these business networks are looking for any content, and are desperate to have people on the air. Just because someone is on television, it does not mean they are an expert. Often they get several people on who each take a different point of view on the same subject. If they are both experts, how come they cannot even agree on the same issues? Since this is the case, you should always be leery of any recommendations made by these experts. For all we know, experts may have been told what to recommend before coming on the show by the network itself. You should research any recommendation in full before you even consider it as a possible investment.
Obviously business television stations do have their benefits. They offer timely information and current stock prices. They also have information pertaining to the current business environment and various views about where the global economies are headed in the future. In general, do not stop watching financial news stations, but merely change how and what you think about them. Financial news stations should be treated as entertainment. If you hear anything that you like, or are interested in, you should put in further research to verify it for yourself.
Overall, I hope you take anything you hear from business television stations with a grain of salt. They can provide good general information about the business world, but their network bias should always be remembered. It is also important to realize how ridiculous it is to consider anything you hear on a station as a tip to “beat the market”. There are millions of others also watching and listening to the exact same program that you are, so any special tips that are mentioned are likely to be followed by plenty of others. By doing your own stock research and getting to trust your own skills, you will not need to rely on these networks for your investment ideas. Remember to make your investment goals and to be patient in order to stick by them. Unlike what the business networks tell you, becoming rich does not occur overnight. Let the others spend their time worrying about their investments. You can focus on the more important aspects of life, while the uninformed pay their lives away in trading fees.
Today we will look at financial news networks and how they are both beneficial and destructive.
When a person is just starting to get into investing, they might believe that a good first step to take is to start watching financial news stations in order to get an understanding of the market. While this can be beneficial, it can prove to be detrimental. This does not mean that you should avoid financial news stations at all cost, but there are several things you should always keep in mind while viewing them.
Personal finance has never been easier for individuals to control. Discount Brokerages and the Internet have provided the individual with all the knowledge and power needed to take total control of their finances. This power is both a curse and a blessing because if one does not control their personal finances properly, they can be taken advantage of. This needs to be kept in mind; even when dealing with the discount brokerages themselves. These brokerages make the majority of their money from the fees they charge for each transaction an account holder makes. As a result, discount brokerages motivate customers to trade aggressively by making many transactions. They do this because the discount brokerages are making the most profit off of customers who are frequently trading and therefore are frequently paying trading fees.
Now you may be wondering how all of this ties into financial news channels. There are not any discount brokerages that actually own a business television station, but they do relate in the way they make profit. Simply put, the more you use (or view) either of their products, the more money they earn. Business television stations are businesses of their own. For example, NBC Universal (which is partially owned by General Electric) owns CNBC. The station makes money through advertisements. Advertisement fees are correlated to the amount of viewers that watch (on average) at a specific time. This means it is to television station’s advantage to be on the air as often as possible, and to get as many viewers as possible, in order to be able to charge more money for advertisement space.
A major issue with financial news stations is their actual program content. As previously stated, these stations benefit by getting the largest audience to watch their station as possible. Financial news stations have gained large audiences by turning the stock into a game. Sometimes it’s a numbers game and the program throws a variety of ratios and nominal values to verify an opinion of a stock. What does it really mean that a new publishing house IPO projects sales of 1.2 million books within five years? More often, it is a timing game, or a race against the clock. Investment advice stands for “right now” only. If a station suggests buying a particular, they mean buy NOW (and tune in tomorrow to find out when to sell). Even the language these stations use make the stock market sound like a game. Stocks do not increase or decrease in dollars, but in “points”. Every day ends with a focus on the biggest gainers (the winners) and the greatest losers. With all of this constant, ever changing information, how can anyone not watch these stations all day? The financial new stations have found the best way to keep audiences tuned in and these programming trends are here to stay.
The problem with this style of programming is that it takes out one of the most important aspects of investing, patience. How can anyone feel good in their own investments when they are constantly bombarded with stocks ideas that are going to be “the next best thing” on a daily basis? Furthermore, when an investment one is invested in is mentioned positively on one of these networks, the investor is likely going to become overly optimistic with their holdings, staying in their investment longer than they would have originally. Holding onto a stock for too long is just as detrimental because it goes against your original, unbiased strategy. The longer you hold, the more you stand to lose. If you are in a situation where you are holding a stock simply because you hope it increases in value, you are no longer investing. You are instead gambling, which in the long term makes losers out of everyone. Personal finance is not about gambling.
Unlike what these business television networks would like you to believe, investing is not a game. What the discount brokerages don’t want you to know is that you can make money without having to constantly trade into new stocks. By doing your proper homework and having a long-term plan in mind, you can make sound investments that require little supervision. This does not mean your investments should go unmonitored, but it is unnecessary to be checking them everyday. In fact doing this will just make it harder for you, as you will want to lock in any profits you have secured or may be frightened by a slight loss. If you have done your proper research and are properly diversified, selling at a slight loss or gain will definitely cause you to miss out on larger future gains that you would receive by patiently staying in these investments.
Business television is also famous for the amount of “experts” they have on. The viewer needs to realize that these business networks are looking for any content, and are desperate to have people on the air. Just because someone is on television, it does not mean they are an expert. Often they get several people on who each take a different point of view on the same subject. If they are both experts, how come they cannot even agree on the same issues? Since this is the case, you should always be leery of any recommendations made by these experts. For all we know, experts may have been told what to recommend before coming on the show by the network itself. You should research any recommendation in full before you even consider it as a possible investment.
Obviously business television stations do have their benefits. They offer timely information and current stock prices. They also have information pertaining to the current business environment and various views about where the global economies are headed in the future. In general, do not stop watching financial news stations, but merely change how and what you think about them. Financial news stations should be treated as entertainment. If you hear anything that you like, or are interested in, you should put in further research to verify it for yourself.
Overall, I hope you take anything you hear from business television stations with a grain of salt. They can provide good general information about the business world, but their network bias should always be remembered. It is also important to realize how ridiculous it is to consider anything you hear on a station as a tip to “beat the market”. There are millions of others also watching and listening to the exact same program that you are, so any special tips that are mentioned are likely to be followed by plenty of others. By doing your own stock research and getting to trust your own skills, you will not need to rely on these networks for your investment ideas. Remember to make your investment goals and to be patient in order to stick by them. Unlike what the business networks tell you, becoming rich does not occur overnight. Let the others spend their time worrying about their investments. You can focus on the more important aspects of life, while the uninformed pay their lives away in trading fees.
# posted by mikeyarmo @ 12:27 AM 
