Market Noise Or: How I Learned to Stop Worrying and Love Doing Do Nothing

The financial press makes a lot of noise reporting on stock market updates, but really very little of it is useful or actionable.

Knowing what the Dow Jones or S&P 500 indices did on a given day is not useful for your long term retirement goals. You should ignore all the noise and pundits and stick to a steady, consistent investment plan.

What Is "The Market"?

• The stocks of U.S. companies can be found on one of three American stock exchanges: the American Stock Exchange (AMEX), the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASDAQ).
• The Dow is always in the news, but only measures 30 stocks, so it's not representative of the overall market.
• The NASDAQ is a leftover from the dot.com bubble when so many people were buying tech stocks traded on the Nasdaq exchange that the media started reporting on the changes as a proxy for how one narrow segment of the market were doing. It's not much use to the average investor. More money is traded on the NYSE each day than on the NASDAQ.
• Sometimes, you hear about the S&P, or the S&P 500. This index only contains the stocks of 500 hand picked large companies, but at least it has a pretty high correlation with the overall market. You might own a fund that actually tracks this index.

What Should I follow?

The most common indices that measures the whole stock market are the Wilshire 5000 and the Russell 3000, which measure the movement of thousands of stocks. Follow these; blockbuster total market funds such as Vanguard's do so it pays to keep an eye on what your money is actually being invested in. The Wilshire 5000 contains stocks from all three of the exchanges.

You Don't Need To Care What The Market Did Today

No serious investor cares about one day's stock market movements. If you're investing for 5, 10, 20, or 30 years, a single day doesn't matter. If the markets went up, great: do nothing. If the markets went down, oh well: still do nothing. You should be looking at the performance over a week, month or year before drawing conclusions on where the market is heading.

What A Relief

Indeed, financial news is of very little value and will mostly just cause you stress and anxiety. Tune it out, follow your investment plan and simply do nothing.