Some of my friends do the tsk-tsk lament when politicians are not sufficiently wonkish with their policy proposals. I recommend against the pearl-clutching routine because I point out to them that people with graduate degrees are only 5% of the U.S. population and are not the intended audience for most stump speeches. When I want sophistication and nuance, I look to the legislation being offered, and usually, it’s there.
It is an important life skill to recognize that not every bit of information that you encounter is intended with *you* specifically in mind as the beneficiary. At best, this imbues you with the virtue of humility. At a minimum, it will you make you a more savvy processor of information.
I ask that you keep this in mind when you read business and investment-related commentary because the goals of most sites is not to help you build a passive, intergenerational collection of assets.
There are two alternative premises that are pursued in delivering content that may affect your investment decisions:
First, most business news is provided with the aim to maximize viewership. I have only written three articles that tangentially concern Donald Trump, and all three of those articles fall within the top ten I have ever written in terms of page view count.
Second, even when you encounter information that has the good-faith aim of helping you make money, the time horizon is so short that the practical utility of the advice is speculation at best. People are interested in what Tesla, Netflix, and Amazon will do in the next twelve months. Very few investment writers couch their analysis in the language of the 2017-2027 timeframe.
If you spend time reading CNBC, Seeking Alpha, The Wall Street, or The New York Times business section, you should keep in mind two separate questions when you read stock-specific articles: (1) Does this cover a typical frequently prone to exaggeration, such as the tabloid side of politics and the fashionable stock of the day? (2) Does this contain any information that could be referenced as important five years from now?
On that second question, you should find yourself answering “no” to the supermajority of investment commentary that you read.
On the other hand, when you ask pension fund managers and those entrusted with maintaining generational wealth the question “How should I invest?”, the answers you will get will generally be homogenous.
The advice will contain the following: (1) Find businesses that have historically stable cash flows, moderate to low debt, and have low prospects of future technological disruption like Colgate-Palmolive, Nestle, and Johnson & Johnson; (2) Maintain adequate personal liquidity; (3) Diversify into at least two dozen different investments; (4) Put investments that generate the highest ongoing tax bills into the most tax-advantaged accounts. It always comes back to those four factors.
I offer this reminder because you might read mainstream and alternative news sources and wonder: “How come nothing is tailored to what I’m doing? Am I that out of it?” It is important to keep in mind that the payoff for media tailoring to long-term interests is very low. Writing articles about collecting yet another U.S. Bancorp dividend and seeing bank earnings increase by 7% has a very limited audience demand.
I wish that the number of people presently interested in the Kardashian’s latest exploits would take up an interest in generational wealth planning, and I wish the number of people currently interested in long-term investing would become the market size for the Kardashians. Then you might see some more articles that cover the role blue-chip stocks can play in creating true financial security. But I don’t know how to make that trade.
Part of the reason why I’m glad Warren Buffett made Berkshire Hathaway famous is because the country is devoid of investment role models. Berkshire’s 400,000,000 share position in Coca-Cola is one of the few investment stories that can showcase how $1 can turn into $25 over time if you are patient and follow the advice outlined above.
Don’t give into the spotlight fallacy and treat the lack of widespread discussion about passive investment strategies as proof that the goal is misplaced or impossible to execute. You need to keep in mind that delayed gratification and stable cash flows are not lucrative drivers of profit for business media outlets and this creates a tension between your best interest and what is profitable for media publications.
Originally posted 2017-01-13 10:20:34.
