Reading the news won’t help you be a better investor, but it will surely entertain you, says Societe Generale’s Dylan Grice.
Grice says he went on a “news diet,” and didn’t see any negative side effects, except that he missed the fun of it all.
From Dylan Grice:
In “Fooled by Randomness” Nassim Taleb said the news makes idiots of us because it gives us confidence, not insight. Like a PhD in macroeconomic theory. So a couple of months ago I decided to experiment. I took Taleb’s advice and restricted myself to just The Economist each week and the occasional blog, avoiding everything else.
And I came to the conclusion that Taleb is right: surprisingly, I didn’t actually feel less informed; it made no difference to the performance of the pitifully small Grice retirement fund (which was unfortunate, some ‘performance’ would have been nice!); it made no difference to conversations I had with friends or family; to my overall sense of well being. I found that if anything was important it would find me. And reaction is easier than prediction.
But I also realised that I missed the news for its pure entertainment aspect. Finding out how sub-stories end after the fact without the suspense before was a bit like seeing only the football results on a Monday morning.
Grice recommends investors enjoy the news, if they’re so inclined, but focus instead on value when investing, utilising Grice’s preferred method, intrinsic value to price (IVP). IVP focuses on calculating what companies are making more that their cost of capital, eliminating those that only break even on operations.