Can the financial media give investment advice?

No.

But that doesn’t render it unimportant. Those who think so have no grasp of how crucial the financial media has been for society throughout history. The business news does a lot of things very well – holding the powerful accountable, informing the public about the markets and economic trends, calling out frauds, etc.

But the thing is does poorly is transmit investment advice.

This is not the fault of the media – good advice is specific to individual people, so by definition a broadcast or mass publication couldn’t possibly succeed in this regard.

I spoke to UNC Professor Chris Roush, one of the nation’s foremost authorities on how the press covers finance, on the topic this week…

What are the issues with financial media providing investment advice?

Often times, especially on television, nuance either gets lost or is never present to begin with — the format simply doesn’t allow for it. There is also a gigantic mismatch between professionals talking about their opinions and the viewing audience. It’s highly unlikely that pro traders and money managers can be emulated by civilian investors in actual practice. There are also huge aspects of investing that cannot be accurately depicted in the media.

For example, when a pundit mentions a stock that he or she likes, there is rarely any discussion about position sizing, intended time frames, or what would indicate to the investor that a thesis has been proven wrong. Therefore, taking advice directly from someone’s opinions in an article or TV segment amounts to trying to follow a recipe with just half the ingredients and none of the necessary measurements.

Head over to check out the whole thing at Chris’s website, Talking Biz News:

The financial media and investment advice (Talking Biz News)