Most research in the field of finance is backwards-looking rather than being predictive. Reading financial information may seem like productive work, but most of this content has little to no chance of leading to better results. Yet, many people plough through, reading news and research until their eyes turn red. After all, critical thinking is more complicated than reading, and it might impress a few people if you are up to date on a wide range of financial subjects.
When confronted with the sensationalism and hype now masquerading as news, portfolio managers need to understand which press releases spin the facts, management explanations that test the boundaries of probability and earnings reports that ignore basic arithmetic. Investment blogs have made things by simplifying and exaggerating financial news. Pseudo news analysis clutters the web, making it even more difficult to stay well informed.
There are three main questions you need to ask before taking the article you read into consideration: is the article based on opinion or data, does it describe past conditions or predict the future, and does the article have a testable hypothesis. These are difficult questions to answer that simply, so here are a few factors you should consider.
Understand the Consensus
The conventional wisdom of the finance industry needs to be acquired to bet against it. Groundwork on a specific investment thesis makes this task much easier. Take notes while catching up on the relevant news.
Seek Disagreement
Just like political news, financial news can very likely have biases towards individual companies as well. Some blogs might favour some companies over others, making it difficult to choose. To work around this problem, readers need to read both sides of the story and reach a conclusion.
Question the Narrative
Financial news reporters might frame issues in a way that is confusing or distorted because of being under intense deadline pressure. Reading too much financial news can be counterproductive because narratives are often misleading, incomplete or completely wrong.
Respect the Data
Tables, charts and numbers are excellent places to start for economic data and results. Always check the primary source for authenticity when possible.
Avoid Partisan Interpretation
Do not bring political biases when reading and interpreting financial news, and be wary of commentators who want to propagate their political agendas.
Develop Your Own Framework
Before reading the news, have a self decision-making framework in place, or else you might be unduly influenced by what you read. You need to have an independent view of the markets, without which the media can force their biased view upon you.
Tips for White Papers
When reading academic research and long reports, reviewing several articles from several sources on the same topic is better than randomly reading through. To do so, sort the contents by topic, schedule weekly reading time when possible after saving papers in folders, and read in batches.