Over time we come across different kind of triggers that leads to a sudden dip or even a prolonged bear market. As investors, it is not sufficient for us to determine if the bad news caused a decline in a particular stock, sector, or market because markets are innately resilient. This means that every bear market is potentially a great investment opportunity. However, we still have to determine if that particular series of news items are indeed bona fide so that we can execute our strategies to average down further or proceed with dollar-cost averaging. Otherwise, it would be extremely risky to start buying into those assets. The post will cover three points that we can use to check if a piece of particular news is legitimate so that we can determine our moves later on.

Source of the news (In relation to geopolitics)

This is kind of the more obvious fake news in the market. This is because the few main news centers in the markets are centered around China and the US at the moment. This means that whenever there are opportunities to write about their opponents, new agencies will tend to accentuate and exaggerate the news item to trigger a negative reaction in the market. For example, nearing the end of 2020, the Chinese regulators started to investigate tech giants causing a huge market fallout gradually as the US continues to sell all the listed Chinese firms on NASDAQ. From that event, we started to see the media use every opportunity to strike increasing amounts of fear into investors who are still keen on buying Chinese tech companies resulting in all-time lows for highly profitable companies.

Statistics used to describe the performance of the company

The media uses a variety of tools to help narrate the performance of companies. This includes using relative growth and decline of revenue, net profits but those figures are usually not reflective of the entire company’s performance. That, in turn, paints an incorrect picture in the minds of amateur investors causing them to buy or sell blindly out of greed or fear respectively. Most of the time, we should spend more time understanding what is the whole picture of the company’s performance before we can determine if that particular company is indeed on a decline or poised for higher growth ahead. If we are more sensitive towards misinformation, then we will be able to achieve more sustainable yields over time.

The condition of the country which the company operates in

Every country is at a different stage of growth. For example, emerging markets are for sure able to grow faster since their markets are generally expanding and their revenue channels are not fully established. Hence, we should always take into consideration the long-term trajectory of the country in which the company is based to discern if the targeted news item is indeed impactful in the long run. As mentioned earlier, investing is about making moves to ensure that our yields in the longer term will stay sustainable and realistic so that we can react appropriately to all kinds of volatility in the markets.

Closing Thoughts

As investors, we should not focus on news that presents exaggerated information or statistics that are potentially misleading. Instead, we should always consider the holistic performance of that particular piece of information or report before we take action. This is because taking a step back before reacting will often lead to more positive results and yields over time.