Information overload

Information overload is a state in which an individual is exposed to an excessive amount of information, to the point where it becomes difficult to process, absorb, or make informed decisions.

 

 

This overload can occur in various aspects of our lives, from work-related emails and news to social media updates and personal research. The consequence is that it can lead to decreased productivity, stress, and a sense of being overwhelmed.

 

In the age of the internet and digital technology, we live in a world inundated with information. While this information explosion offers unprecedented opportunities for learning and staying informed, it also presents a challenge known as information overload.

 

I sometimes refer to this information overload in the financial services sector as ‘financial pornography’. Financial pornography is quite simply the explosion in confusing marketing campaigns across all sectors, which are designed to sell newspapers, TV spots, online advertising and financial products. The problem for consumers is that it creates large amounts of noise and clutter making it difficult to find the right information.

 

Daily financial news and market fluctuations can create a sense of constant urgency and fear. This can lead to financial anxiety and impulsive decisions, which are detrimental to long-term financial goals.

 

When inundated with information, it becomes challenging to make well-informed decisions. The sheer volume of data can lead to ‘analysis paralysis’.

 

This is where a financial adviser is indispensable. We are masters at sifting through the clutter and honing in on the pertinent facts. Even more important than sifting through the clutter is keeping the objective in mind, it’s the primary role of a financial adviser to find solutions to puzzles rather than finding the ‘best new thing’. Something many people get wrong is that whilst there might be another solution it might not fit their puzzle.

 

The news at the moment is filled with information about the Hamas/Israeli conflict, Ukraine and mass demonstrations around the world.  It has been noticeable, especially since the Covid lockdowns, that there appear to be more violent crimes and disturbances around the world including New Zealand. There has been a phenomenal growth in conspiracy theories fed by Internet Servers.

 

Confirmation bias is a phrase coined by English psychologist Peter Wason. It is the tendency of people to favour information that confirms or strengthens their beliefs, or values, and is difficult to dislodge once affirmed.

 

Internet Severs and search engines are designed to find links to items that you have been reading or searching for.

 

As a financial adviser ‘confirmation bias’ is something that we need to monitor and be aware of in ourselves and our clients. Confirmation bias is when you seek information that supports your views, ignoring contrary information, or when you interpret ambiguous evidence to support existing beliefs, or attitudes.

 

This is our rationale for adopting an ‘evidence-based approach’ to investing.

 

Confirmation bias occurs in all walks of life when you seek confirming, rather than disconfirming, evidence to support your view. This is the danger of the Internet.  Search algorithms bias the search results, resulting in feeding you information to support your view and sending you down a rabbit hole.

 

This is one of the advantages that Lyfords advisers have. With their science backgrounds they can adopt a more disciplined approach to questioning the relevance of the information.

 

In a world where financial markets can be unpredictable, an evidence-based approach offers a dependable path toward financial success and security.

 

An evidence-based approach to investing is founded on the idea that investment decisions should be based on rigorous research and empirical evidence rather than speculation or market timing. This approach emphasizes a disciplined and long-term strategy, aiming to achieve consistent, risk-adjusted returns.

 

Diversifying your investments across different asset classes (such as shares, bonds, and real estate) reduces risk and enhances the potential for stable returns.

 

Passive investing involves holding a portfolio of assets designed to replicate the performance of a specific market index. This approach often comes with lower costs and tends to outperform actively managed funds in the long run.

 

Minimising investment costs, such as management fees and trading expenses, is crucial to achieving higher net returns over time.

 

 An evidence-based approach relies on research and studies conducted by financial economists and academics to shape investment strategies.

 

This approach focuses on long-term investment horizons, recognising that short-term market fluctuations are often unpredictable.

 

By adhering to a disciplined, evidence-based strategy, investors can experience more consistent, predictable returns over time.

 

Passive investments tend to have lower management fees and transaction costs compared to actively managed funds, increasing the investor’s overall return on investment.

 

An evidence-based approach discourages emotional reactions to market fluctuations, leading to more rational and less impulsive investment decisions.

 

Diversification and asset allocation strategies inherent in this approach help manage risk and minimize exposure to market volatility.

 

An evidence-based approach typically provides clear and transparent investment strategies, allowing investors to understand where and how their money is being allocated.

 

Historical data and research have shown that an evidence-based approach has consistently outperformed many other strategies, providing a solid track record of success.

 

If you are feeling overwhelmed, worried about World events and how to mitigate the impact on your investment portfolio or your long-term retirement income please contact us.