photo by Steve Punter

Below are excerpts from an interview with Dave Young, President and Founder of Paragon Wealth Management.

Question:

The media is a great source of information. Why shouldn’t you invest based on what you hear in the media?

Answer:

Media sources are paid by advertising revenue. Advertising revenue is driven by ratings. High ratings are created by sensationalism. Most of what you see is sensationalized.

This creates a dangerous situation for investors because they will make decisions based on inaccurate information.

Question:

Can you give me an example?

Answer:

For example, last year as the economy weakened, it would have been normal for the stock market to sell off. A normal sell off would have been a decline of 25-30 percent. Instead, the market went into an extreme sell off, losing 56 percent of its value. Much of that sell off was driven by a media created frenzy coupled with political uncertainty.

Question:

How can you say with certainty that the market sell off was caused by investors following what they saw in the media?

Answer:

To understand the power of the media, let’s look at the swine flu media frenzy.

Normally, each year, the flu kills about 30,000 Americans. Since April, when this started, there have been only 550 American deaths.

After the media hype began:

-My doctor told me that everyone he treats thinks they have the swine flu.
-Egypt ordered the killing of 400,000 pigs, even though the disease is mostly transmitted human to human.
-Russia banned pork imports from Spain and Canada.
-Joe Biden recommend that no one travel in confined places during this time.

The difference with the stock market…

-With swine flu you can convince yourself you are sick or might get sick, but you can’t make yourself die.
-With investments, when following the media, you can scare yourself silly and sell all of your investments.
-Selling at the wrong time kills your chance for long-term investment success.

Question:

If you can’t make investment decisions from what you see and hear in the media, then what can you use?

Answer:

It is important to follow a proven disciplined investment strategy that doesn’t follow emotion. At Paragon Wealth Management, we create customized investment strategies for every client. Each strategy follows this criteria:

• Provides effective diversification
• Works in different markets and time frames
• Is flexible and stable
• Fits clients’ personal needs and goals

Paragon Wealth Management is a provider of managed portfolios for individuals and institutions.  Although the information included in this report has been obtained from sources Paragon believes to be reliable, we do not guarantee its accuracy.  All opinions and estimates included in this report constitute the judgment as of the dates indicated and are subject to change without notice.  This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.  Past performance is not a guarantee of future results.