The worldwide media, TV, Internet and newspapers, have a massive influence upon our investment decisions. While not all of this information is totally unbiased it is most certainly worth following as sometimes it can prompt and other times highlight new trends. If you were to search for information on for example the South African property market you could guarantee a negative, neutral and a positive article would not be too far away from your next mouse click. So, should you allow media coverage to impact your investment making decisions?
What is an investment market?
This may sound like something of a bizarre question but what exactly is an investment market. If you strip the market down to the bare bones it is quite simply an information exchange where a whole range of different views and opinions are taken into consideration and then market trends emerge. As we have seen in years gone by, when governments attempted to influence money markets, the trend will always win in the end although the injection of significant capital can have a short-term impact.
So, if media coverage is part of this “information exchange” then you need to embrace it, respect it and then make your own decision.
Facts and figures
There are many different ways to measure investments, value and indeed calculate whether an asset is overpriced, underpriced or fair value depending upon the overall picture. The trick to using facts and figures as a tool for your property investment is to ensure that you are looking at the latest version of these facts and figures and measurement parameters. We only need to look at the UK property market where the mortgage multiple against income has doubled, trebled and in some cases gone even further compared to traditional measurements of years gone by.
So, this is a perfect indicator of where you need to move with the times when calculating demand for property, whether you like it or not, but also bear in mind the potential risk of moving back to more traditional investment market measurements in the future.
Don’t fight the trend
Whether you love it or loathe it the trend will always be your friend but whether you invest on the back of a trend is a decision for you. Those who try and fight the trend at a relatively early stage will often come unstuck while those able to recognise when a trend is overstretched and could “turn” can make substantial returns.
One of the main dictators of short-term trends is human emotion in the shape of fear and greed. If you look at the stock market of 1987, just prior to the crash, share ratings were moving to levels which had never been seen before. They seemed to be separated from reality and traditional measurements with the fear of missing out seeing many investors continue to plough funds into the market. When the markets turned, when the trend changed and everything went back to reality, some of the investors effected never recovered.
Conclusion
Whether you like it or not the media do have an impact upon many areas of our everyday life including investment. However, it would be foolish to make an investment purely and simply on the back of media coverage but it should be one of the elements you consider when measuring whether an asset price is fair, undervalued or overvalued. You should also go with your own gut feeling and stick to your own investment criteria as some of us are more risk orientated while others are perhaps more conservative. There is nothing wrong with either of these policies.