Four Ways Media Bias Can Wreck Your Portfolio
Media bias is a well known theory in the political realm. The writers and reporters who bring you information and news can’t help not sliding some of their political or philosophical bias into their articles and news reports.
If a reporter has a liberal bent, so will his or her article. Conservative news outlets offer that point-of-view.
Where investors run into trouble is when they believe the bias only relates to political news. As they consume the information, or absorb it, they let it alter their perceptions of reality and how they react to that reality.
However, media bias can cause–and is causing–an effect on your portfolio and your returns.
Here are a few ways how media bias can cause financial bias.
Reporters don’t understand finances
Reporters are not financial experts. In fact, most reporters don’t even know anything about investing. The mainstream media is full of superficial financial and investing information and analysis.
Bad news sells
Another form of media bias is the natural tendency to report on bad news. They even have a saying in the news biz: “If it bleeds, it leads.” As tales of economic woe fill the headlines, it can skew the investor’s sense of reality.
Agenda-driven news
In today’s media marketplace, information is created and dispersed with an agenda in mind. Politicians and companies place stories and generate interest through the media. This can lead to the bubble and bust phenomena. Anyone who watched “house flipping” shows in the mid-2000s can attest to this. Or, just watch reporters who voted for Barack Obama explain away a spiraling deficit.
Too little, Too late
News, economically speaking, is often too little, too late. By the time an economy is pulling out of recession, reporters are still writing their doom and gloom stories.
These four ways media boas can affect your portfolio are just the tip of the iceberg. How about you? Are there other ways media bias affects the investor’s perceptions?
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