If you follow financial news, then you’ve probably heard quite a bit about the effect of tariffs on the stock market and the implications for individual companies. But does reading or listening to financial news actually help you as an investor?
Financial news is a broad term that covers everything from small businesses in small communities to daily market updates to quarterly earnings reports. While we all have our own personal preferences when it comes to which types of financial news we read, in general it can be helpful for investors.
Financial news can give you insight into what other investors are thinking and allow you to plan accordingly. If your primary goal with investing is long-term success, then yes, finance news does matter.
Here are some examples of where financial news can impact your investment portfolio and why it matters:
Understanding the Impact of Macro Events
There will always be news items that have short-term effects on the market, but many of these will have little long-term impact on your portfolio. For example, if the Federal Reserve announces a change in interest rates, it can have a significant short-term impact on the stock market.
But this event doesn’t necessarily have an impact on your investment strategy. Similarly, some macro events can cause significant short-term disruption to your portfolio. For example, a large oil spill can drive down the price of energy stocks, but the effect will likely be temporary.
If you’re trying to analyze the impact of a specific news event, it’s important to first consider what sector of the market it impacts. It’s also important to consider the significance of the event in terms of sheer size (such as how much oil spilled in the aforementioned example).
Finding Bad News is Just as Important as Finding Good News
While it might be tempting to only read about the companies with soaring growth and exciting new products, ignoring the financial news about struggling companies can be problematic.
If you notice that a company you’re invested in is struggling, it’s important to take action. You might want to sell your shares before the company starts making layoffs or makes other changes that negatively impact its financial performance.
By only reading the news about companies that are doing well, you’re missing out on valuable information. Bad news is just as important as good news, and it can help you make better investment decisions.