Mark Twain once famously quipped, “Never let the truth get in the way of a good story.” Today, in the age of information overload, it might be more apt to say, “Never let the truth get in the way of a good headline.”

Characteristics of Headlines

The primary purpose of headlines is to grab your attention, to compel you to click or tune in. Fear-based headlines tend to dominate, preying on our concerns, anxieties, and fears, and they are especially effective in this endeavor.

Just a few weeks ago, we were inundated with headlines proclaiming the failure of Silicon Valley Bank and ominous predictions that this failure was just the tip of the iceberg. The media thrives on apocalyptic spins because they know it captures more attention – “if it bleeds, it leads.”

Deconstructing Headlines

Given the remarkable power of headlines, it’s essential to learn how to break them down. This process enables us to think more critically about the information presented and, ultimately, make more prudent decisions. Let’s take one of the most common and alluring types of headlines as an example:

“Economist who called the 2008 housing crash has a new prediction.”

This headline has the potential to entice us because it implies that an economist possesses superior knowledge, especially since this economist accurately predicted the financial crisis. We might wonder how much better our financial situation would be if we had heeded his advice in the past. Consequently, we might be tempted to listen to what he has to say now.

To approach headlines more thoughtfully, we must consider the economist’s track record on predictions. What has he forecasted since 2008? Was that the only prediction he got right? Regrettably, the headline doesn’t furnish us with this crucial information. This is where the importance of considering what isn’t being reported becomes apparent.

Improving Your Decision-Making Process

Critical thinking about headlines and the investment stories they introduce can significantly enhance your decision-making abilities. Financial information is often presented in a way that grabs your attention, and it can be selective in the information it imparts – all to make the story more alluring. However, it’s imperative that your decisions take into account all available information, not just what is being reported on a given day. By approaching headlines with a discerning eye, you’ll be better equipped to make well-informed choices that align with your long-term financial goals.