| The advent of the Web has, more often than not, created a unique phenomenon…information overload. As an aspiring Web writer I often felt that if I read one more newsletter for writers, I was going to gag! I became physically ill from all the information available to me. The news I read about in the morning, was old news by the afternoon. And there was so much of it! I'd get dizzy trying to process it all.
This enormous amount of information came and went so fast, but that is the nature of the Internet. Information travels at the speed of light and in huge increments.
The key to help avoid "information overload?" Ignore most of what you read. I've become adept at speed reading and deleting. And I'm finding out that Mr. Carlson would be proud of my accomplishments at ignoring much of what I read.
In his book Eight $teps to $even Figure$, he warns us to beware of "information cascades." These are tidbits and news flashes that we may come across, often posted by the financial media. A good example of this was covered in a previous article when we looked at the young man who sent out the phony press release. When it was discovered that this "cascade" was a lie, formulated by an investor who stood to lose a lot of money if the stock price continued to rise, many people suffered devastating consequences.
There were people who were not fazed by this "prank." They either took the time to try to verify the information or they were not even aware of the information to begin with (ignorance in this case was indeed blissful and can sometimes save you a lot financially).
And this example is exactly what Mr. Carlson would like us to be aware of. He reports, "Our tendency is to act on new information. The problem is that much new investment information is irrelevant to a company's long-term prospects."
And our example of the press release from above is a lesson learned. Yes, often companies change the CEO and many times that is favorable for the company and the investors. But it should probably not be the sole reason for selling our stocks.
Buying into an "information cascade" prevents us from using our critical thinking skills, as regards the buying and selling of our stocks. "On an impulse" is never a good reason to do anything and most assuredly when it comes to selling our stocks.
In addition, Mr. Carlson also warns us, "And even if new information is relevant, chances are you'll be the last to know." Once information reaches us, it's already made the rounds and isn't relevant to us anyway.
Similar to my son and his homework. I think he's just cruising right along in school and his Spanish teacher phones me to say, "Your son hasn't brought his workbook to school for the past two weeks." Translation: "What kind of a mother are you anyway? Don't you know what your kid is doing in his classes?"
Parents usually are the last to know about most things related to school and our children - Mr. Carlson was exactly right again. "….you'll be the last to know". Our kids are masters at making us believe that everything is going so well for them at school.
And then we get hit with the "information cascade" from the teacher and our kids find out exactly what it means to go without their video games for one week. "Information cascades" help us as parents. Let's work on ignoring them when it comes to our portfolios.
Thank you for joining me,
Joyce |
