CNBC makes its fame by providing information that investors are supposed to be able to use. Do investors watch CNBC? Should you watch it all day, every day?
Take a look at the video below and find out what I think.
Do Investors Watch CNBC?
The transcript is below.
I suspect that more gamblers than investors watch CNBC. Let me explain why. My opinion is that CNBC is there to provide entertainment. While they certainly provide a bevy of business news, most of it is absolutely useless to the average investor.
If you’re looking to invest in specific investments, then you’re choosing to do so assuming that you have an informational advantage over the rest of the playing field. If I were a scientist who knew how to create cold fusion, then I’d invest in my cold fusion widget and build it before releasing it to the world. I’d know more about cold fusion than anyone else out there and could profit from my informational advantage.
CNBC, Bloomberg, and other news services serve to reduce the informational advantage that any individual investor could have over everyone else. By the time CNBC releases news about any given stock, that information is factored into the market price. I’m not saying that the market is rational by any stretch, but it is efficient.
Furthermore, you see the scroll of trades going across the bottom of the CNBC screen. Seeing those numbers makes you susceptible to a psychological bias called apophenia. It’s what causes you to see patterns in numbers or to see Jesus in oil stains. The patterns don’t exist, but you convince yourself that they do.
Therefore, if you’re going to invest in something because you saw it on CNBC, you’re probably gambling more than investing. Stick with low-cost index funds and speculate on yourself instead.
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