How To Analyze Financial News As You Manage Your Portfolio

How To Analyze Financial News As You Manage Your Portfolio

Most of the research people do is not predictive. It relies on financial information gained from the past. This is not something that is productive since we need to look ahead. How do you predict what will happen in the future? Those that manage to predict the evolution of finances are those that manage to make the most profitable investments.

Financial news helps you identify many different wonderful opportunities. You can use the data that you get on to make some quick purchases. However, this is only the case in the event that you actually read viable news.

Most of the news that you find on the internet will be invaluable and will only bring in data that should not be used for financial investment decisions. Skillfully reading financial news is paramount for success but how do you actually do that?

Questions You Have To Ask

There are some tedious questions that you need to ask when you analyze financial news. The best ones are:

  • Is the article trying to predict future events or just describes past conditions?
  • Is the information presented based on opinion or data?
  • Is there a testable hypothesis in the article?

Some Practices

  • Understanding Consensus

It is really important to understand conventional wisdom. This helps you to do the exact opposite. Everything becomes really simple if you did the appropriate groundwork on the investment thesis. Always jot down the things that you discover so you can get back to it.

  • Look For Disagreements

Always understand the trade’s other side. This automatically means that you have to find the opinions that are contrasting what you think. When you do this, you avoid the appearance of confirmation bias.

  • Question Narratives

Almost all reporters are faced with huge deadline pressure. They also have to deal with frame issues as they present things that are distorted or confusing. It is usually counterproductive to read many financial news articles since narratives are incomplete, wrong or misleading. Be sure that you do not trust financial news that has a questionable narrative.

  • Respect Data

Economic data always revolves around numbers, tables and charts. Make sure that you check the main information source. Charts are always a lot better than just commentary.

  • Identify Partisan Interpretation

We all have political bias but when referring to financial analysis, it needs to disappear. Interpreting financial news is all about having zero political bias. Always be wary of the commentators that have some hidden political agendas. This is the worst thing that you could do as you would end up trusting financial news that is completely inaccurate and leads to bad investment decisions.

Final Thoughts

To sum up, reading financial news is very important when you want to make informed financial investments. The problem in many cases is that people end up trusting articles with fake information. You have to avoid this at all costs. The best thing you can do is to always triple check all the data that you find and only make investment decisions after you are 100% sure of the choices you make.

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