Like any addiction, financial porn can easily drag you into its clutches and make it difficult for you to break free. It is extremely damaging to your portfolio and resisting the urge to fall for its allure is essential.
Financial porn is difficult to escape. No matter where you go in the investment world, you will be given advice and information that is specifically geared towards getting investors excited about investing in a particular company. The term associated with this tactic is “click bait”.
The excitement that is built by using seductive language often results in risky behavior and a short-sighted outlook. It encourages active trading that carries many fees, thereby negating a nice portion of your return. It also pulls you into investing in stocks that are promising, but the return is low.
Financial Porn Tantamount to Deadly Quicksand
The language of financial porn is often a dramatic exaggeration of the facts. For example, a stock that has some promise will market as having “explosive growth” or as being the “next Starbucks”.
Have you ever seen a potential investment labeled “for serious investors only”? Yes, that is more financial porn. The intended consequence of putting this label on it is to create a sense of overconfidence and lead you to engage in even more risky behavior.
5 ways to break your addiction to financial porn https://t.co/IMMzc7r7zv #traders #trading @aFreedomTrade pic.twitter.com/i1GoO9J2PH
— TraderPlanet (@TraderPlanet) June 11, 2016
As an investor, you, of course, want to have current information about your investments and the more information the better. Or is it? Information is good, but irrelevant information designed to drag you into the world of financial porn is all part of the tactic.
So, how do you resist falling prey to financial porn? Here are 5 things you can do to avoid the temptation.
Five Ways To Break The Addiction
1. Stick to the Basics
All you need to know is the current share price and how it compares to the intrinsic value of the company. Everything else is hype and irrelevant. Avoid language focusing on the price movement of a stock instead of the financial and competitive position of the company.
2. Avoid Acting Impulsively
It is always a bad idea to rush into buying or selling a stock based upon exaggerated statements like, “you are giving up a once in a lifetime opportunity”. That is exactly what the advice giver wants you to do. Let your emotions calm down, take a step back and if you have doubts, pass on it.
3. Turn off the TV and Radio
The financial news tells you what is happening in the markets today. It will have no bearing on what will be 10 or 20 years from now. Staying glued to the TV and Radio and basing your decisions on a single day in the life of a stock will surely lead you down the wrong path.
4. Invest In High-Quality Companies When They Are Undervalued
The best time to buy is when the media is reporting doom and gloom because of a short-term downturn in the stock of a high-quality company. It may be down today, but over the long term, if you have invested in a high-quality business, the likelihood is that it will bounce back and you will be ahead of the game.
5. If It Is Too Good To Be True, It Probably Is
This may be cliché, but it is sound advice. Nothing is ever risk-free and if someone is promising you quick returns at a ridiculously high rate, walk away and do not look back. These promises are guaranteed to be nothing but financial porn.
Just following these five simple steps will already put you ahead of the game.
Find out how you can safely increase your returns without the need of financial porn, click here.
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