Should Investors Tap Into Media For Investment Advice?

Last weekend at a party, I met a rather interesting individual who declared that ‘the best things in life are free’. To buttress his view, he spoke about investments, and questioned the need to engage an adviser (read pay a fee), when one can get free advice from the media i.e. publications and television channels. I’m unaware as to what drove his belief: experience or the lure of ‘free’. In any case, his views found several takers, and soon he was dishing out ‘free advice’ on the best sources of investment advice. 

To be honest, this isn’t the first time I have heard such views being expressed. Many investors are convinced that sourcing and acting on investment advice from media can be financially rewarding. But is that line of thinking prudent? Let’s find out.

Advice vs. Coverage

Any adviser worth his salt will agree that investment advice should be focused on the investor i.e. customised to his risk appetite, investment horizon and goals. The key is to navigate the investor’s portfolio through various events, and stay on course to achieve predetermined goals.

Conversely, the media typically focuses on current events and trends. The journalist/host will have a perspective in place. Domain experts contribute to the perspective with quotes and/or data. Having covered one event, the media moves on to the next.

Whether or not the coverage is apt for every investor following it, is anyone’s guess. Therein lies the fundamental difference between investment advice and media coverage.

Go Where the Wind Blows

In Feb 2016, when domestic equity markets crashed, stocks of public sector banks were among the worst hit, reeling under burgeoning bad loans. Expectedly the media coverage was negative, and most experts opined that the worst was far from over.

Between then and now, both bank stocks and equity markets have staged a smart recovery. While fundamentally not much has changed, appreciating stock prices have resulted in sections of the media putting a positive spin on PSU bank stocks with experts stating “You can’t do away with SBI. If it’s not in our portfolio, we are missing out on India’s economic growth…” and so on. To clarify, such instances of rapidly changing positions are common in media.

Is this a case of mala fide intent? Not at all. This is simply the nature of the beast; media covers events in a manner that will appeal to its audience. Investors choosing to treat media coverage as investment advice, and acting on the same, only have themselves to blame.

Should We Shoot The Messenger?

Does the solution lie in insulating oneself from media? I don’t think so. Media can be an excellent source of information and updates. Following reputed channels and publications can help stay abreast of events. That’s where investors must draw the line.

I’m not suggesting that every investor must engage an adviser. There are several who are conversant with the nuances of investing, and don’t need to engage an expert.

As for investors who need assistance, but have never paid for investment advice, admittedly it can be a difficult threshold to cross. But there’s a need to weigh up the downside of a misguided investment versus the cost of acquiring prudent and expert investment advice. 

In any case, relying on media for investment advice seems like an imprudent choice.