How to Filter the Financial Noise in Retirement

This adviser has 10 ways to avoid making bad investing moves

By Ron Kelemen
Originally Posted On August 28, 2014

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Ron Kelemen is the author of The Confident Retirement Journey and a certified financial planner with The H Group in Salem, Ore. His website is planningvisionprocess.com.

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(This article is adapted from The Confident Retirement Journey by Ron Kelemen.)

To be truly confident about your retirement journey, you need to be prepared to deal with surprises along the way. One potential detour, or roadblock, that deserves your attention is what I call “financial noise.”

With all the financial noise these days, it is challenging to develop adequate knowledge and convert that to wisdom-based action.

Many financial advisers notice a big change in some retirees once the retirement party is over and they return from the cruise. They now have a lot of time on their hands to watch the cable news channels and surf the web.

As a result, they worry more, lose their long-term perspective, and some start trusting what they see on TV more than they do the steady wisdom of the adviser that helped get them to retirement.

In many ways, investing is harder today than it was over 32 years ago when I started my practice. Back then, the challenge was getting information and being able to act upon it. Today, the challenge is too much financial information and the tendency to overreact to it or become paralyzed by it.

In 1980, for example, Money magazine was in its infancy. Today, you can find thousands of books, magazines, newspapers and websites devoted to investing and financial planning.

In 1980, there were 564 mutual funds; today (as of the end of 2012), there are 7,596 open-ended mutual funds. Add in all their share classes and that brings you to 24,257. Plus, there are 1,194 Exchange-Traded funds that didn’t exist in 1980, and 602 closed-end mutual funds. The total: a whopping 26,093 funds and ETFs.

In 1980, there were very few financial TV shows or cable networks. Now, CNBC alone hosts about 50 guests a day, many of whom are asked for their hot stock tips.

At what point does all this information become just “financial noise”?

I think all of this overload and confusion can be divided into a spectrum:

DATA > INFORMATION > KNOWLEDGE > WISDOM

So much of what is out there really falls into the data and information categories. But data and information are noise. They crowd out knowledge, and knowledge without a sense of perspective and experience cannot become wisdom.

So, before you read that next financial magazine, surf the web or tune into that TV financial news show, spare yourself the overload and save some time and peace of mind by asking yourself the following 10 questions from my financial-noise filter.

Ron Kelemen’s Financial-Noise Filter

1. Will this information be obsolete and forgotten within a few hours, days, or weeks? If yes, go do something more productive.

2. Does this apply to me? If not, skip to the next article. I’ll be the first to admit that not everything I write in my weekly blog and quarterly newsletter is relevant to every reader.

3. Will this information give me peace of mind or increase my anxiety? If it increases your anxiety, move on to something else.

4. Can I do anything about it? If not, don’t worry about it.

5. Will I do anything about it? If not, then why waste your precious time and mental energy??

6. How will this information get me closer to my financial and life goals? Sometimes it can be mesmerizing to watch the stock ticker on one of the TV monitors in the gym. But how will knowing where the Dow is at any given moment change your life? And does that distract you from thinking about the more important things in life, or enjoying a good soundtrack with your headphones?

7. Does the source know my circumstances and me? If not, take all general advice as only a starting point. All too often, I see the adverse results when people follow well-meaning general advice that wasn’t appropriate for them because there were other mitigating facts or client objectives.

8. What is the source and its interests in promoting the information? If it’s to obtain more subscriptions, more viewers, more Internet hits, sales, higher ratings, etc., move along.

9. Does this source have hands-on experience “in the trenches” providing financial advice and managing money, or is the source merely reporting about it? When in doubt, put more trust in those with recent real-life experiences. It’s one thing to write about it, it’s quite another to know from experience how things work with real people with their unique circumstances.

10. Is the source accountable if it is wrong? If not, don’t rely on it. Your licensed adviser providing specific advice to you for a fee is held to a much higher standard than a stock analyst’s report, an Internet chat room, a TV talking head or the author or publisher of any book or article.

All of us constantly face the cacophony of financial noise. Just being aware of it is half the battle.