Over the past year we have witnessed events that have impacted us emotionally and financially. In establishing a solid financial plan, it is important to note that advice from a financial professional is far more prudent, than acting on sometimes-sensational media reports. Reading periodicals, listening to radio and watching television is fine, however, media companies have an agenda. Magazines are out to sell copies and radio and television news programs are out to capture the most ears and eyes to their advertisers. Since good news does not sell as well as bad news, it is not surprising that bad returns in world stock markets is being emphasized, and good economic news it being discounted.

Here is an example to show how free investment advice from the media is worth what you pay. An August 13, 1979 cover of a well known national magazine screams ?he Death of Equities ?How Inflation is Destroying the Stock Market? The article advocated investing only in the ?ot sectors?of oil and precious metals. This date turned out to be the beginning of the greatest increase in the stock market of the twentieth century. From then until the end of July 2002, the price of oil had declined 5.1%. Gold had increased 1.66%. However, the US S&P stock index returned 1,631.34% over the same twenty-three year period. Calculated as a compound return, this equals 13.25% annually!

Another example of questionable advice was also captured on television. Recently in July of 2002, a noted news network journalist advised viewers to ?hort?stocks to make money. Shorting is a speculative investment strategy that works only when stock markets are declining. Shortly after this sage advice was dispensed the market began to increase and by early September had regained nearly 10%, resulting in losses to those who heeded this advice.

We are currently living in an agonizing two and a half year bear market. The good news is that the North American economy is generally solid and improving. Try not to act too hastily on the information and opinion from media outlets. These sources cannot take the place of personalized financial planning advice. It is not easy to confirm and verify the information to determine if the strategy makes sense for your circumstances. Lastly, avoid hot investment ideas and stick to a long-term financial plan, as this is the only sure way to achieve financial success.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.