“I read it on the Internet, it must be real” is likely to go down as the hallmark of this year’s presidential election.
Research suggests that engagement on social media sites, principally Facebook, was far higher for fake news headlines than for real reports from legitimate media sources. According to Buzzfeed News, hoax news stories generated 8.7 million shares, vs. 7.4 million for real journalism.
Whatever side you might have chosen to vote for and for whatever reasons, the upshot is that millions of your fellow citizens probably voted on the basis of utterly made-up “reporting.” A sobering thought.
All of this will die down in time and the national consciousness will shift toward the holidays, then something else. What’s far less understood, of course, is just how much of what we read online about other topics also is fake.
You don’t have to go too far online, for instance, to find stock touts. These age-old scams use publicity to gin up interest in a single share, usually one that is small and thinly traded.
If enough people bite, the stock goes up — until it all falls apart like a ponzi scheme. By then, of course, the authors of the tout have cashed out.
It’s illegal to do this, but the Internet is completely unpoliceable in reality. People get taken in all the time, especially when reading purported “insider” reports about otherwise worthless little firms that trade over the counter.
Another time-honored scam are “systematic” trading schemes. Sign up for a special report, essentially giving up your email to receive marketing materials, and then watch out!
Your inbox is soon flooded with stock tips, weight-loss pills, super vitamins, all manner of quackery.
If you decide to take the newsletter, you’ll get advice alright. None of it profitable, except for the newsletter author collecting your subscription fee.
You can shield yourself from all of this unnecessary risk by ignoring the niche financial media and just sticking to the mainstream business press. That’s a good first step.
Second, of course, is to avoid stock picking altogether. If you want to own stocks for their inflation-fighting capability, own them through a diversified, low-cost index fund.
For instance, you can buy the S&P 500 for a tiny fraction of the cost of owning a typical actively managed stock mutual fund.
Likewise, there are index funds for the broad bond market, real estate, and foreign shares, too, also available at a very low cost.
Once you own 500 stocks, you tend to think less and less about which ones are winning or losing at any given moment in the business cycle. The fake news headlines on TV and blaring at you from the Internet gradually lose meaning.
Sure, the events of the day could affect the value of your investments, but the long run is what matters and research shows that the stock market can go neither too high nor too low with eventually reverting to its mean.
That “mean” is where you want to be, adding in your reinvested dividends and contributions and compounding your money steadily over decades. Then you can just glance at your phone and chuckle at the headlines, rather than worry about them.