The UK’s investment and finance sector is worth billions, making it one of the most important nodes in the economy. But for the investors that operate within it, life isn’t always easy. Building wealth and keeping it sustainable isn’t simple, and it requires a lot of ongoing work. One of the many tasks on many successful investors’ regular to-do lists, for example, is monitoring the financial news.
Financial news offers a wide range of key benefits. It can alert an investor to a potential problem that their investment plans might face, for example, while it can also allow for effective planning. It’s also the main ammunition for a strong, strategic forward plan. Here’s why these things are so important – and where you can source the financial news you need.
Types of analysis
Before proceeding, however, it’s worth noting that reading the financial news isn’t something that all investors do. Some traders take what’s known as a technical approach, which means focusing entirely on price data and stripping out all references to macroeconomic conditions. However, reading the financial news is part of an overarching strategy known as “fundamental analysis”, which means taking into account all of the many conditions that shape an economy. These could mean trends in politics, for example, while it could also mean looking at data releases on economic performance, employment and investment rates.
Depending on the asset classes that make up your portfolio, you may find that monitoring the financial news is essential for reducing risk when you make your decisions. Looking out for ups and downs sometimes means that you can plan accordingly. To some extent, every asset class can be moved by major economic events. A decline in the value of a stock market, for example, can have what is known as a “contagion effect”, and can affect everything else – including bonds, commodity prices, and so on.
Specific asset classes, meanwhile, can often be moved by particular events. Regulation announcements can often affect emerging asset classes such as cryptocurrencies, for example. Announcements of interest rate decisions from central banks are often chronicled in forex market news, meanwhile. Remember, though, that monitoring the financial news is just half the battle. The next thing you’ll need to do, of course, is to interpret it and to make effective decisions based on what you find – and that’s where knowledge and comprehension come in.
Understanding and knowledge
The financial news is generally split into two parts: raw figures and analysis. To a seasoned trader, the raw figures often act as signals. Many analysts and journalists use concepts such as “support and resistance” to understand how a value is changing and where it might go next, for example, and these are based entirely on quantitative price data. However, to a newbie trader (or to one who isn’t as numerically or technically minded), these signals can be confusing. And given that they’re often repeated in financial news outlets, it can sometimes feel a little overwhelming. Luckily, many financial news outlets also offer qualitative analysis alongside the raw figures to help explain what matters and why.
Take the example of cryptocurrencies. On the face of it, an announcement about regulation would be perceived as a risk to the value of cryptocurrencies. However, some types of regulation can actually be desirable for those in the crypto space, as regulation can reassure potential investors and make it more likely that more people will move into the market and keep demand high. These are the sorts of topics that are discussed in the analytical, text-based sections of financial news outlets – and that can make all the difference to the life of a trader who is struggling to ascribe the right levels of importance to each event or threat.
If you’re a trader using fundamental analysis tools, then it’s essential to use financial news outlets to ensure that you’re making the right decisions. In some ways, financial news acts as a way to firefight problems as and when they arise: they can alert you to potential market drops, for example, while they can also indicate which markets and asset classes might make the most sense for investment. However, the financial news can also help you to increase your understanding of the markets, and make more informed and strategic decisions in the long term. All in all, it’s well worth ensuring that you keep abreast of the latest financial developments.