Listen Up. Very Little Market Noise Matters


I share the sketch above with the permission of Carl Richards, a CERTIFIED FINANCIAL PLANNER™ and the director of investor education for the BAM ALLIANCE. As the creator of the weekly “Sketch” Guy column in The New York Times, Richards has a real talent for making complex financial concepts easy to understand.

If it were up to me, I’d entitle this sketch “Market Noise that Matters.” (As you can see very little overlaps with your financial plan!) That is, the chatter, i.e., Market Noise, on CNBC or around the office water cooler should not impact your financial plan. Richards says his inspiration for this sketch was Thomas Piketty’s book, Capital in the Twenty-First Century. He notes, “Everyone was talking about his formula. In between, people were debating just how many readers actually got through all 696 pages.”

The point is your financial plan should not be revised according to advice from current bestsellers. The same advice holds for major market events or a hot stock tip from your brother-in-law. Rather, changes to your portfolio should be firmly rooted in changes to your risk tolerance or short- or long-term goals. Instead of looking out to the market or to others for direction, look inward. Similarly, you should not view beating the benchmark as a measure of your success. Your success is personal; it depends on reaching your goals, not how the market performs.

If you enjoy sketches like this, check out Richards’ book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money.

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