This article explores how financial headlines influence investor behavior, often exacerbating emotional decision-making and undermining long-term investment outcomes. Drawing from behavioral finance research and investor psychology, the article argues that investors should adhere to a written investment plan rather than respond impulsively in the face of uncertainty and sensational news. Selected headlines from Bloomberg and CNBC illustrate the impact of the modern media environment on perception and behavior. The insights of Peter Lynch, Jack Bogle, and Warren Buffett are used to contextualize the long-standing wisdom of patience and discipline in investing.

The rise of financial anxiety

Today’s investors are inundated with a 24/7 news cycle that thrives on urgency. While access to information has never been easier, clarity has never been harder to maintain. Financial headlines are designed to capture attention, often through alarming or emotionally charged language. This reality presents a challenge for investors: distinguishing between signal and noise and avoiding making decisions rooted in emotion rather than logic or planning.

The emotional power of headlines

A review of today’s (4/24/25) major financial media illustrates the challenge. From CNBC, headlines such as:

Bridgewater hedge fund warns Trump policies could induce a recession
The S&P 500 formed an ominous ‘death cross.’ What history says happens next

frame the economic outlook in dramatic, even catastrophic terms. Similarly, Bloomberg ran with:

Odd Lots: Why the Real Tariff Pain Hasn’t Even Begun
One of Wall Street’s Biggest Bulls Slashes View as Tariffs Bite

Despite these headlines, the S&P 500 rose nearly 2% today, and tech stocks surged on strong earnings reports. This disconnect between the emotional tone of news coverage and actual market behavior is a classic example of availability bias—a cognitive distortion where individuals give undue weight to recent, vivid, or emotionally charged information (Tversky & Kahneman, 1973).

This behavioral response, driven by the availability of alarming headlines, often leads investors to abandon sound strategies in favor of reactive decisions. Yet history and experience warn us against this trap. As the following insights from some of the most respected minds in investing make clear, enduring success comes not from responding to noise but from adhering to a disciplined, long-term approach.

Wisdom from the investment greats

The dangers of reactionary investing are not new. Legendary investor Peter Lynch warned:

“Far more money has been lost by investors trying to anticipate corrections than lost in the corrections themselves.”

Jack Bogle, the founder of Vanguard, put it more bluntly:

“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible.”

And Warren Buffett offered perhaps the most elegant summation:

“The stock market is a device to transfer money from the impatient to the patient.”

These insights underscore the importance of focusing not on media narratives but on long-term goals and rational portfolio construction.

Recognizing the wisdom of these investment luminaries is a critical first step—but applying it consistently requires more than agreement; it requires structure. Investors need more than memorable quotes to overcome the behavioral impulses triggered by market volatility.

They need a written financial plan that serves as a behavioral compass, grounding decisions in clearly defined goals, timelines, and risk tolerance. Translating timeless investment principles into practical, repeatable actions makes the financial plan a vital tool for staying the course when emotions run high.

The role of a written financial plan

The antidote to reactionary behavior is a well-crafted financial plan that clearly articulates an investor’s purpose, time horizon, risk tolerance, and rebalancing strategy. Far from being a static worksheet, the plan functions as a behavioral anchor, offering clarity during periods of uncertainty and helping investors resist the temptation to respond emotionally to sensational headlines.

A thoughtfully structured financial plan does more than outline investment choices and target allocations. It proactively defines how to respond to market volatility, eliminating guesswork when clarity is most needed. Doing so transforms abstract wisdom into actionable discipline—bridging the gap between intention and execution.

Planning over panic

In a media landscape dominated by noise, fear, and speculation, the most effective investor response is not reaction—but preparation. Rather than chase headlines, successful investors rely on a carefully constructed financial plan and the discipline to follow it. Behavioral economics and decades of market data affirm that patience, consistency, and structure drive long-term success.

So, when the next wave of headlines warns of crisis or collapse, the wise investor doesn’t panic. They return to the plan—and stay the course.

For more information about our financial planning services, please call (503) 905-3100 or contact us.

References:

Tversky, A., & Kahneman, D. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124–1131.

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Disclosures: These market returns are based on past performance of an index for illustrative purposes only. Past performance does not guarantee future results. All investing involves risk, including the loss of principal.  Index performance is provided for illustrative purposes only and does not reflect the performance of an actual investment. Investors cannot invest directly in an index.

The information provided in this communication is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. Market conditions can change at any time, and there is no assurance that any investment strategy will be successful.

Diversification does not guarantee a profit or protect against a loss in declining markets. Asset allocation and portfolio strategies do not ensure a profit or guarantee against loss.

The opinions expressed in this communication reflect our best judgment at the time of publication and are subject to change without notice. Any references to specific securities, asset classes, or financial strategies are for illustrative purposes only and should not be considered individualized recommendations.

Human Investing is a SEC Registered Investment Adviser. Registration as an investment adviser does not imply any level of skill or training and does not constitute an endorsement by the Comission. Please consult with your financial advisor to determine the appropriateness of any investment strategy based on your individual circumstances.

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In a recent interview Jason Zweig, a personal finance columnist for the WSJ, had a quote that resonated with me.   

  "Emotional discipline is the single hardest thing about the investment game."   

After accumulating over 30 years of writing and thinking about investing and personal finance, Jason points to emotion (not market valuations, stock picking, or market corrections) as the most difficult part of investing.  As financial advisors, we witness the struggle of emotional discipline firsthand. Recent news (and noise) around tech stocks, housing prices, federal spending, cryptocurrencies, inflation, and interest rates have made it more difficult for investors to maintain this discipline.  

are you an investor facing FOMO or FOBI?  

This lack of emotional discipline manifests itself typically in one of two ways:   

1. Fear of Missing Out (FOMO) in the market. If you are 15 years old, FOMO is seeing your friends doing something without you on social media. If you are an investor, FOMO is the internal dialogue of “I see my neighbor making money on ____, I need to buy ___.” Someone who has FOMO tends to follow the crowds. FOMO can lead an investor to think their rate of return is a benchmark for their success rather than achieving a return needed for a successful financial plan.

2. Fear of Being In (FOBI) the market. FOBI is the internal dialogue of “I have seen how this story ends. I need to sell ____.” Someone who has FOBI likely listens to news sources who make a profit off pessimistic news. Note: It is easy to push the sell button, it is always harder to get back in.  

FOMO and FOBI may seem different, however, both are ultimately trying to guess where the market will go next and are speculative in nature. Let 2020 be a great reminder that it’s difficult to predict how the market or a particular investment will do year to year.  

Periodic Table of Investment Returns from the last 20 years

One of my favorite charts to illustrate the difficulty to predict short-term performance is "The Periodic Table of Investment Returns". This graph ranks the annual returns of popular asset classes from best to worst over the last 20 years.   

Source: Blackrock; Past performance is no guarantee of future results. The information provided is for illustrative purposes and is not meant to represent the performance of any particular investment. Assumes reinvestment of all distributions. It is not possible to directly invest in an index. Diversification does not guarantee a profit or protect against loss.

An investor experiencing FOMO is likely paying attention to the top row, the best-returning asset classes over the last 20 years. This investor is likely trying to guess what will be the highest performing asset class in the coming year.  

Meanwhile, an investor experiencing FOBI is likely paying closer attention to the bottom rows, with a specific focus on larger market selloffs like 2001, 2002, and 2008. A FOBI investor is worried about being invested in the wrong asset class and will try to avoid the worst-performing asset class in the coming year.  

The Periodic Table of Investment Returns reminds me of three investing truths:   

1. It can be dangerous to try and guess what is next. Consider US small-cap stocks (Sm Cap – in light green), which had the highest average annual return over the 20 years. While small-cap stocks were the best performer they also showed the widest variance in outcomes. Guessing right in 2003 would have provided a positive return of 47.3%. Guessing wrong in 2008 would have provided a negative return of 33.8%. 

2. Past performance is not an indicator of future returns. Making investment decisions based on recent performance (e.g., looking at 1, 3, and 5-year returns) can be detrimental to an investment portfolio.  International’s performance as a prime example (Int’l – in yellow), over the five years from 2003-2007 international was the best performing asset class by a long shot. International seemed like the sure thing. Unfortunately, the investors who followed international’s high returns were greeted with a brutal 43% selloff in 2008.   

3. Portfolio diversification is the answer to combating FOMO and FOBI – See “Div portfolio” in purple along the middle rows.  Diversification is an investment strategy that aims to maximize a level of return for the risk desired. Diversification accomplishes this by strategically spreading money across different types of investments.   

 A diversified portfolio helps investors maintain emotional discipline. Diversification can avoid the fear of missing out on the next hot investment. Owning more of the market will naturally provide more opportunities to not miss out on the growth of specific sectors or individual investments. Diversification can also temper being fearful of being in the market and owning the next big loser. Diversification disperses your dollars across many asset classes, which means if one company is a dud it will not sink the ship.  

If you struggle with emotional discipline when investing, congratulations you are a human. If helpful, please use The Periodic Table of Investment Returns as a great reminder that emotional discipline is difficult. Putting a plan in place along with proper diversification can help investors make smart long-term decisions.

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One of the interesting subplots in the finance industry during COVID-19 has been the rise of the day trader. Robinhood, an online brokerage and trading platform, acts as a proxy for many investors who are rapidly opening accounts at other brokerage firms including Charles Schwab, E*T, TD Ameritrade, Fidelity, etc.

Our firm works with thousands of employees via their company-sponsored retirement plans and has had many conversations end with a question/comment along the lines of, “What do you think of this Robinhood thing? Is it worth putting some money in there? Seems like (fill in the blank tech company) is making money! Should I buy some?”. So, I felt compelled to address the question(s) and provide some context around where a speculative trading account fits into a greater financial plan.

THE MAJOR PLAYERS

Source: Piper Sandler

E*TRADE: more users opened accounts in the month of March than any full year on record.

Charles Schwab: 1 million new accounts so far in 2020.

Robinhood: 3 million users opened accounts in Q1 2020. For perspective, there have been 13 million accounts opened at Robinhood since its founding in 2013.

The GROWING appeal OF DAY TRADING

The barrier of entry has never been lower to open an account and buy shares of publicly traded companies. Because many individuals are at home, trading is as cheap and accessible as ever, and some firms have incentive offerings (like a free share of stock when you open an account). Pair that with the stock market reaching its low point for the year on March 23rd and having one of its fastest recoveries ever (in other words the last 5 months have been a winning proposition for many investors), and you get to the point where we are today.

Today could be a euphoric place for an investor owning stocks since March. To me, euphoria looked like TMZ coming out with a trading subscription service… yikes. Stocks have only gone up, and popular tech companies have led the way. Kudos to those who might have doubled their money on a company like TESLA, but the last 5 months do not paint a realistic picture of what investing looks like over the long haul.

the emotional rollercoaster of Owning single stocks

When talking about owning a single company, I like this example. Owning a company like Amazon over the last 10 years seems like a no brainer (today). If you had invested $10,000 10 years ago, it is worth over $268,000 today. However, when you see that over the last 10 years, an investor would have had to hold through down periods of -25% over 5 times to get to where the stock is today. In other words, the stock was down 25% of its high over 5 times. Holding a company through those periods can be difficult, emotional, and in my opinion, is an objective way of capturing what owning a stock (even one that has performed as well as Amazon) is like.

Investing advice for smarter day trading

Whether you are someone who has already played around, are thinking of dipping your toe in the water, or your ego is already as big as ever because you’ve been a successful trader for the last 5 months, here is some advice on what it looks like to invest in your long-term plan vs. speculating.

Boundaries, Boundaries, Boundaries: If you are going to buy a stock on your own, don’t have it impact your overall investment strategy and long-term plans. What does that mean? Invest a dollar amount that you would feel comfortable taking a 100% loss on.

A positive outcome can mean… many things: Recently the Winklevoss twins (yes those Winklevoss twins) were quoted saying that Elon Musk is going to mine gold on asteroids orbiting the Earth, thus decreasing the value of gold and increasing the value of bitcoin (I promise this isn’t fake). One scenario is that their theory is wrong but in the next 5 years, owning bitcoin could be a profitable trade. In the same light, if you have owned a technology company or a fund that tracks technology companies since March, you have probably made money. Does this make you the next great market predictor? Most likely not. At Human Investing, we have a saying "process over results". So, in these situations, whether or not your account is checking up on your process is equally or more important.

Trading Journal: If you are seriously interested in the market and having a brokerage account, a trading journal is imperative. If you have a prediction, write it down, track it, and review your track record. It’s not a bad idea to do this for a few weeks to test the waters before you open an account.

Small Losses Can Lead to Long-Term Positive Outcomes: Here’s a hypothetical, stay with me. You read this post, you open an E*TRADE account, and deposit $200. You end up buying a few stocks and start following the market. You are following investing influencers on social media, listening to podcasts, and even watching CNBC in the morning. Then life happens. You get a little bored, lose track of your password, reset your password, and lose track again (this version of you doesn’t have LastPass 😊). Six months go by, and you see that your $200 is now $50. As a byproduct of this experience, you realize that you are better off opening up a ROTH IRA at Vanguard contributing $100 a month into an age-based target-date fund because you now care more about retiring comfortably. Your $150 loss on your account made you realize:

1. You are not interested in picking stocks and it isn’t easy.

2. You educated yourself about the market, the benefits of a ROTH IRA, and moved the needle on helping yourself retire.

Time will tell if this Robinhood movement is a fad or a long-term trend. Either way, if you have questions, want to grab coffee via zoom and talk markets, or talk longer-term planning, our team is here to be a resource.

Other Articles You Might Enjoy On This Subject

* Inside Story On Robinhood

* WSJ video on Robinhood

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Do not let your emotions get in the way of making smart investment decisions.

It is difficult to separate emotions from reality. We often view the world through the lens of whatever emotion we are experiencing, and unchecked emotions can give rise to suboptimal financial decisions.

My role as a financial advisor allows me to have many conversations focused around money. Through these conversations over the last 12 months, I have witnessed the gambit of the emotional response to the stock market and its volatility. What I discovered is that an individual’s emotional response tends to be heightened by three things:

1. The more zeros at the end of their account balance.

2. The amount of negative news consumed.

3. The greatest of which, whether they have taken the time to build a financial plan.

In his book The Behavioral Investor, psychologist and behavioral finance expert, Dr. Daniel Crosby reminds us that our emotions can’t be trusted when it comes to making investment decisions.

“The fact that your brain becomes more risk-seeking in bull markets and more conservative in bear markets means that you are neurologically predisposed to violate the first rule of investing, “buy low and sell high.” Our flawed brain leads us to subjectively experience low levels of risk when risk is actually quite high, a concept that Howard Marks refers to as the “perversity of risk.” – Dr. Daniel Crosby

Like the stock market, our emotions are cyclical. This cycle of emotions experienced as an investor can range from pure euphoria to utter despondency (lack of hope).

Source: Russell Investments

This emotion is often not dictated by the investor, rather it is the investor’s response to the market. The wild thing is, we have seemingly experienced all of these emotions over the last 12-month period. Compare the cycle of emotion to the S&P 500 over the last year.

Is it a coincidence that these two images almost mirror each other? I don’t think so.

It is completely normal to have an emotional reaction to your finances. Your account balances are often in direct relationship to your future financial freedom and well-being. However, it is only when an investor acts on these emotions do they get themselves in trouble.

Investor’s making short term emotional changes to their investments hurt their chances at long-term returns. A study conducted by DALBAR, Inc. discovered that over the last 30 years, the average mutual fund investor underperformed the market by almost 6%! Their finding is that investor’s change investment strategies too often to realize the inherent market rates of return.

Here are some action steps for avoiding emotional investment decisions:

• Look inward — Take an introspective look to acknowledge your emotional response over the last 12-month market cycle. Will you emotionally make it through another market drop? Right now is the time to build self-awareness, because the reality of the market is not IF it will have another correction, but rather WHEN.

• Look outward — Do you have someone to help you make wise financial decisions throughout life’s many emotions and seasons? Someone, to stand between your emotions and your finances? This is one of the many ways a financial advisor can add value to your comprehensive financial well-being.

• Look forward — Does your risk profile align with your financial plan? Are you taking on too much risk (or, too little)? Take some time today to review your holistic investment strategy and consider making any changes while the market has rebounded since its market low on March 23rd.

Our team at Human Investing realizes your family’s financial well-being is just as much “human” as it is “investing”. Let us know how we can help, contact us at Human Investing or call at 503.905.3100.

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