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D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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Ignore news. Outperform by 56%

Posted by Muthu on July 19, 2015

Jason Zweig mentions the following in this article.

“A psychologist had compared the investment results of people who received frequent news updates about their stocks against those who got no news at all. He found that no news is good news: Investors who were kept in the dark outperformed the news junkies by up to 56%.”

You’re aware that we always ask you to ignore the constant news flows about markets and economy. We also suggest checking and reviewing the portfolio only once a year; at the time of annual review.

Either you should learn not to react emotionally to financial news or if that is not possible, ignoring it altogether would be the best choice. You’re all not even stock investors. You invest only in equity mutual funds. As long as we are confident that our economy and corporate India would only grow in the years and decades to come; everyday news flow is completely irrelevant. What is important is getting the long term picture correct and sticking to it.

Please remember every day growth which would not make it to news is continuing to happen. As an economy, we are poised to reach $8 to $10 trillion in next 15 years. This would get reflected in the performance of corporate India and hence markets.

I wrote last month as to how CRISIL AMFI Equity Fund (a basket of equity mutual funds) has delivered an annualised return of 22.74% or multiplied money by 40 times over last 18 years. Many good funds have delivered between 40 to 100 times over last 2 decades.

In my opinion, our economy and companies have the capability to produce excellent results for next 20 years as well. I personally feel 15% annualised returns from equity funds over next one decade is very much possible. As always, the ride would be bumpy, with stomach churning volatility and with sharp ups and downs.

One way to make staying the course easier is to ignore the financial news altogether. I repeat, either ignore it or don’t emotionally react to it. I follow the latter as my profession demands I need to update myself on this stuff. Whereas you’ve the choice of completely ignoring market news.

To again quote Jason Zweig:

“…. the challenge for all investors is to consume the news without being consumed by it. Probably the single most important step you can take is to filter it wisely; taking in the news through intermediaries whose judgment you can trust.”

Choose wisely.

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