$21bn wipe out - please explain?

13 Mar 2013

By David Raits

"Chinese jitters prompt $21b wipe-out" Sydney Morning Herald (SMH) 5th March 2013

Anyone reading last Tuesday's SMH would have been justified in thinking that down at the Australian Stock Exchange (ASX) on Monday, a huge bonfire was lit with $100 bills in huge quantities going up in smoke. $21bn is a lot of $100 bills!!

Why is it that journalists, and the media generally, on which so many self funded retirees now rely on for their investment information, feel no shame in using such dramatic language in describing what was a quite normal day in the markets; albeit one where the ASX200 index declined by approximately 1.50%?

Although it is no doubt true that this equates to an overall decline in value of $21bn, why is it that such dramatic language, and quotation in dollars, was not used the next day when the market moved up again and recovered almost all of that loss?

In fact a view of the Business section in Wednesday's SMH, shows that the same journalist covering the markets was consigned to the bottom of page 9. In this article he calmly reported that "bargain hunters step in after Monday's fall", and that the market had gained 1.30%. So, why no mention of the fact that this logically means the market had in fact put on $18bn?

It seems that when the market goes down the loss is measured in dramatic dollar terms within the press and when it goes up, it is just teeny - weenie percentages.

What journalists fail to grasp is the impact that this reporting has on small investors, many of whom rely on the media as a source of accurate investment information. In fact what they are really only getting is 'news' – whatever that is!

Is it any wonder that research continues to show that, on average, small investors consistently miss most and sometimes their entire share of returns they are entitled to from their sharemarket investments? Is it because they are constantly spooked into selling share investments when markets are weak and over investing when markets are high?

In my opinion, the media should accept responsibility for a large part in this unhappy state of affairs. It is important to remember that it is not the role of a journalist to assist readers in making decisions to buy, sell or hold a financial product. This is why it is critical to have a good financial adviser in your corner - someone who can provide you with the right advice for your own long term financial circumstances.

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