Filtering the investment noise
Www. botswanaguardian. co. bw “There is a lot of academic research that points to a strong correlation between cutting out irrelevant information and reaching a goal.”
Why investing in unit trusts just makes sense
most scenarios.
One of the biggest challenges to an investor is ‘ Investment Noise’. This is external information that we might get from various channels, and perceive as having an influence on our investment, or our decision to invest. We get investment noise from the news, the internet and even from our friends and families. It could be news of hirings and firings at a certain company you are invested in, or news of developing political scenarios in a geography you might be vested in.
To be a successful investor, one of the main things you need to do is actively filter out this noise. There is a lot of academic research that points to a strong correlation between cutting out irrelevant information and reaching a goal. In other words, the more successful you are at blocking out irrelevant information, the better your chances of overall success on a particular goal or objective.
The same goes for investment. You need to let your portfolio do the work for you and stay away from emotional decisions based on investment noise. If you see the following present or overarching in any investment linked information you receive, know that it might just be investment noise: 1) Unusable: Information is only ever information
when it is usable. If you receive or come onto any ‘ information’ that does not necessarily affect your long- term strategy, ignore it. It is not yours to deal with. Any ‘ information’ that does not seem to have any bearing on your own portfolio probably does not. If in doubt, consult a financial advisor.
2) Untimely: Information has its own expiry date. If it is not usable to you in the foreseeable future, it is untimely. If there is a likelihood of it changing by the time it is relevant to your portfolio, then it is untimely. When it is untimely, your task is to ignore it because it will bear you no fruit, if not just to derail your plan. 3) Hypothetical: According to Forbes, this is most common type of noise. Everybody loves to speculate. Professionals and amateurs alike, we love to have an opinion. Hypothetical news will only ever help you make adverse decisions regarding your portfolio. It is all fine and well to listen in but try not to act irrationally, based on other people’s unsubstantiated opinions. You are bound to get some sort of investment noise throughout your investment journey. However, having a sustainable long- term plan and sticking to it will help you avoid the investment noise that everything will affect your portfolio negatively. If in doubt, seek help from an industry professional, preferably a reputable financial advisor.
Stay away from the noise. Happy investing!
Tiro Howard, works at Kgori Capital, a leading investment company in Botswana