Your path to successful investing in your life is directly proportional to your knowledge. As you embark on your quest to learn more about the financial world, it is equally important to understand the biases that influence the information you receive. The future direction of interest rates and inflation influences your money today. You may want to understand it better every day. There is a possibility that you may watch a video that explains a government policy decision. You can watch a reel or a short video that provides just the information, or a long-form interview in a video podcast. Some of you may choose to read the information on news websites or read an elaborate editorial in a publication.
A lot of the commentary you read online or in the press is affected by the political biases of creators or writers. Some economists and analysts are pro-government, while others are anti-government. You need to focus on the commentary that is loyal to the data rather than any political agenda. Credible, fact-based writing could include information cited from competent research studies. These could include governments, global consulting firms, the RBI, or other regulatory bodies, as well as the World Bank and the IMF.
The government regularly publishes information on key macroeconomic indicators, including growth, industrial production, and inflation. The World Bank and the IMF regularly publish international perspectives on the growth outlook across countries, including India. The Reserve Bank of India puts out information on the factors that influence inflation and the economic growth outlook. Companies publish a significant amount of quarterly data on their financial performance. There are presentations and transcripts of conference calls with analysts, providing a comprehensive perspective on a sector or business. Any commentary that cites such published information and puts out a view could be credible.
The other bias is in the information itself. So, if you are subscribing to a newsletter by a company or a publication, you must understand the motive of that business. A mutual fund will often emphasise passive investing and overlook other avenues of investment. Similarly, an insurance company will not inform you about mutual funds but will instead promote unit-linked plans through its communication. A stockbroker will push you to trade more, as their commissions are linked to the number of trades you do. They may be interested in your financial well-being, but they will not sacrifice their business interests to put out the whole picture in front of you. As a result, you need to understand the content that product manufacturers publish in the financial services space.
Additionally, there are investment and trading recommendations. Research teams at stockbrokers typically issue these. Usually, the number of ‘buy’ ratings is higher than that of ‘sell’. Those in the financial services industry do not like to present a too negative picture. While there are restrictions on making specific recommendations or guaranteeing any return on financial services companies, you will rarely see them criticising any government policy.
What should you do
You need to make the right choice in your reading material before making those right investments. Focus on data, facts, and information-based communication more than that related to any specific product category or viewpoint. Put together a mix of international and national publications that do not overtly sell products or services to you. Opinions are fine if they are based on facts. If they point towards slow growth and high inflation, that is bad news for your money. Conversely, if they point towards faster growth and low inflation, that is good news. In the world of endless scrolling from bottom to top, you need to bear in mind that not everything you read, watch or hear is worth your time.