Do you know that 25 lakh people get affected by Tuberculosis every year in India and 4 lakh people die? Even if 4 lakh people die due to coronavirus in India, we would still be far away from the deaths caused by other diseases.
Media narrative is lopsided and agenda driven. As a reader, you should be aware of this and not get influenced.
In this article, I will restrict myself to investment related news especially not distinguishing between facts and opinions.
These kinds of news flow throughout the day with meaningless discussions and updates on the market movement.
Here are a broad set of issues:
1. Data Manipulation
A stock market index is a subset of companies listed on a certain exchange. For example, Nifty 50 comprises of top 50 companies listed on National Stock Exchange.
Most of the news channels and publications refer to the index performance as market performance. Investors watch these news channels with the assumption that the anchor/journalist has more information than him/her.
Often these opinions are shared as facts because you can pick up any period and prove any point you want to.
Let me show this with the help of a few charts.
Company A Company B
Look at these charts and find out which company to invest.
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Well, both the charts are of the same company, HDFC Bank. Green chart indicates 1-month performance and the red chart indicates 1-year performance.
(If you are able to figure out that these charts are of a single company, you made a good use of your System 2 - Thinking Fast, Thinking Slow by Daniel Kahneman).
Be wary of data analysis presented by news publications.
2. Charts and numbers merged together
A bad set of numbers in the recent quarter may lead to a temporary decline but may not impair future cash flows of the company.
The story can be twisted by comparing charts with the fundamental performance.
I am not against technical analysis but the underlying assumption of technical analysis is that you don't care of fundamentals. However, a stock related technical analysis will create better impression if combined with fundamental performance of the company. That's what media channels and news publications do.
There should be a clear distinction between investing and speculating strategies.
3. One-sided point of view
A few days back, the entire media industry painted Franklin Debt Fund issue as a criminal activity.
First, Franklin Templeton had laid their strategy in the offer document and prospectus. They were investing based on their strategy of focusing on the long tail of the debt market.
Second, Franklin Templeton is a market maker in that segment. Even Crisil, a leading rating agency, approaches Franklin Templeton to get prices for these debt instruments.
Third, asset management company has to approach the regulator (SEBI) before any public announcement of this nature is made. Franklin Templeton received the approval from SEBI stating that the decision to wind up 6 schemes is for the benefit of the investors.
Most of the newspapers skipped these facts and just expressed their opinions in the harshest way possible.
Anyways, because of this one-sided view, a lot of investors became extremely nervous with respect to the entire debt segment including AAA rated bonds!
Balance of opinion is required but is often missing.
How do you deal with it?
First, avoid visual based news channels because visuals create a much lasting impression and even the validation of a lot of issues can’t be done.
Second, irrespective of the print media, DO NOT read newspaper/publication to find out investment opportunities.
Third, read with an active mind that can distinguish between facts and opinions.
News channels and publications sell FEAR because it is easier to retain audience by selling fear rather than plain facts.
I read four financial newspapers (Mint, Business Standard, WSJ, Business Line) and one fortnightly magazine (The Economist).
The purpose is not to get investment ideas but to get facts.
“Be fearful when others are greedy and be greedy when others are fearful” - Warren Buffet
Newspapers or news channels will not help you make this decision. Leverage these mediums to extract facts and develop your own independent investment approach.
Disclaimers
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
The securities quoted are for illustration only and are not recommendatory.
Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
Details of the advisor
Advisor: Ankur Kapur
SEBI RIA No.: INA100001406
BASL Member ID: BASL1337