Separating Real News from Fake News in the Stock Market

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Separating Real News from Fake News in the Stock Market


For an investor trying to build wealth, the massive amount of news coming out of the financial media can be contradictory and confusing. Investors sometimes don’t realize that there are two sides to every stock trade. The seller doesn’t want to own the shares for a range or reasons, and the buyer does so with the belief that the share price will go up. One key to success is to understand which financial news is “real” and which is rumor or opinion, and thus “fake.”

Here are some tips that help you decide whether the stock market information you are hearing, or reading is actual, useful information, or is something we can drop into the “fake news” file.

  • Real News: Information provided directly from the company behind the stock. The best of these are the quarterly and annual earnings reports. Income statements and balance sheets give accurate pictures of how a company is operating. Also useful are press releases on other topics and management comments during conference calls and Q and A sessions.
  • Fake News: Short term market reactions and financial news comments about an earnings report. Wall Street analysts generate earnings forecast that are just estimates, and the stock market treats those estimates like hit or miss targets. Also, in the fake news category are company analysis articles. They can be useful to get an educated opinion, but they are not a substitute for doing your own analysis.
  • Real News: Dividend payments. Dividends are a cash return on your investment that cannot be clawed back. Dividends are how a company shares profits with shareholders. If a company can grow profits, it will also grow the dividend payments. Looking at history and monitoring continued dividend payments are a great way to monitor a company’s financial success.
  • Fake News: Counting on share price gains as sustainable profits. It can be surprising how quickly a stock that shows as a profit in your brokerage account can drop and wipe out your gains, and even go to a loss. The challenge of counting on share appreciation to fuel your income returns is that at some point you need to find another investor willing to buy your shares at a higher price. Trying to pick tops and bottoms in the stock market and share prices is a very difficult, if not impossible, way to build and sustain wealth.
  • Real News: To build wealth or sustain a nest egg to last for decades, you need an investment strategy that will work through the stock market cycles. This means being ready to manage and invest during corrections and bear markets as well as when stocks are going up. In my newsletters I discuss strategies focused on building a dividend income stream. Whatever system and strategy selected, you should know how you are going to handle the periods when stock values are falling.
  • Fake News: Hot tips and get rich quick offers are designed to separate investors from their money and not to help them actually succeed in reaching their investment goals. Think about this: If someone has a system that will turn a few thousand dollars into millions, why do they need to sell it?
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