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Financial newscast (Photos.com)
Financial newscast (Photos.com)

Preet Banerjee

Are daily financial updates more harmful than helpful? Add to ...

If someone knocked on your door every night to tell you what your house was worth, you’d likely see that as a waste of time. Some people see their house strictly as a home, while others see it as a long-term investment.

But for both groups, a dip in housing prices is unlikely to trigger putting their home on the market. A drop in financial markets, however, is more likley to trigger a portfolio sale and part of the reason why could be that people don’t get bombarded with daily analysis on the fluctuations of their homes.

A long time staple of the news is to give a daily recap of financial markets. The TSX, the DOW and the S&P 500, the loonie versus the greenback, oil , and gold regularly get a quick snapshot. You’ll see them once a night on television and perhaps once an hour on news radio stations.

The all-news format television stations even have a ticker which shows individual stock prices and their daily changes constantly running along the screen. In an era when stock screens and price alerts are free and abundant on the Internet, do we really need to be inundated with all these numbers?

The average person is not a day trader. Hundreds of billions of dollars in Canada are invested in mutual funds and exchange-traded funds. Many individual stock investors also intend to hold their positions for long periods of time.

These investors are not going to benefit from hearing solely about daily price movements. To them, frenetically updating tickers might as well be hieroglyphics. If anything, the news flow could lead to bad portfolio decisions as investors reactively want to sell when markets go down and buy after they’ve gone up.

On the flip-side, there are plenty of investors who actively trade. They can routinely make a few transactions a week, and some can rattle off dozens of orders before lunch time. These investors are more likely to be scouring investment -focused TV programming and have access to advanced trading platforms with highly detailed analytics. They may also be religiously reading the business sections of the newspaper and comparing notes with other traders on investment forums.

The point I’m making here is that a nightly recap of index movements is of little value to them as well. They need more - and better - information that that alone.

Completely doing away with regular market updates isn’t going to happen anytime soon, but perhaps a repackaging is worth considering. Axing daily updates in favour of a weekly recap for the broader audiences might actually benefit investors because the daily fluctuations can cancel each other out on a weekly basis. It would be less fear-inducing to hear that “markets were down 1 per cent on the week” versus getting a play by play on a week of daily zig zags.

When the market movements and trends are big enough to be of concern, it’ll still make the news.

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Follow on Twitter: @preetbanerjee

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