Who Are They Talking to?

News & Commentary

Jan 27, 2021

Investing money is a complicated process that involves a lot of time and energy. Some people choose to do it on their own and others hire professionals. The access to trading has evolved so much in recent years that most investors are a click or two away from acting on a tip. Couple that with more access to information than ever before and you have days where stocks like GameStop trade in a 150% range in one trading session.

The information access is one thing, but how it is delivered is another. Whether you are reading an article or watching Fast Money, you have to step back and think about who they are talking to. Are they talking to you? Maybe, but probably not. If the trader trimmed his or her position in Apple, how does that affect your portfolio? Are you going to open the app and sell your Apple? The trader may have simply rebalanced Apple back to a 2% position because it grew to a 3 or 4% position in the portfolio.

On the contrary, if the trader buys a stock, what does that mean for you? Should you jump in?  Well, it depends on your situation. First of all, are you trading or are you investing? A lot of the talking heads are traders that may hold on to a position for a short period of time. Are you going to tune in every day to wait for the trader to tell you when to sell? What if that trader isn’t on the program the day he or she sells?

That is one major problem with programs like Fast Money or interviews where traders give tips. You are usually only hearing the beginning or the end of the trade. This isn’t a knock on them. These are entertaining shows that are generally a good service to both novices and professionals. It just needs to be taken in the right context. They are a great source of information about what is happening in the short term. However, the majority of their trades don’t apply to the everyday investor trying to build wealth over the long term.

Whether you work with a professional or invest on your own, there is no shortage of ideas available to you. It is perfectly acceptable to listen to the talking heads and take the time to evaluate whether any of their ideas apply to you. Just remember, they don’t know you. They don’t know your situation. They are giving very generalized ideas. The best path for you to take is to make a plan and build a portfolio for the long term. If you are fortunate enough to have some spare money to set aside for trading, go for it. Tune out the noise with the rest, stay disciplined and you should be rewarded in the long run.


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