How The Financial News Can Blind You

20 May 2016 | by Sean Stannard-Stockton, CFA

The video below is a rather amazing demonstration of what we’re about to discuss in this post. Give it a view before reading the rest.

(click here to watch the video if you are reading this in an email)

Did you pass the test? If so, well done. Studies show that less than a third of viewers are able to see what’s really important.

Counting the passes made by the players in white is equivalent to trying to track all the little bits of breaking news! that shoot across CNBC, your Bloomberg terminal or your social media stream. The moonwalking bear is what really matters when you are making financial decisions. From a financial planning perspective, the moonwalking bear is your long-term goals and the asset allocation that aligns with these goals. From an investment perspective, the moonwalking bear for Ensemble Capital is the depth and breadth of the competitive advantages — a company’s moat — that we believe will insulate our portfolio holdings from competitive pressures.

A long time ago, investors could do well by seeking out information that other investors did not have access to. But today information is ubiquitous. There is very little opportunity for investors to legally gain access to information that is not widely known in the market.

Today the market environment is characterized by a firehose of information. Investors are overwhelmed by an enormous amount of informational noise. The key to successful investing today does not lie in having access to information that other investors do not, but instead is the ability to focus on what’s important while ignoring the noise. Otherwise, the noise can make you literally blind to what’s actually important.

No matter your investment philosophy, it is critical that you focus on your own moonwalking bear or you risk becoming blind to what’s really important.

While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.

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