5 Ways to Break Your Addiction to Financial Porn

Table of Contents

There’s an addiction in the investment and trading industry no one’s talking about.

You know, those tantalizing headlines and stories that promise easy money but always seem to let you down in the end? I call that financial porn.

Financial porn is the constant stream of seductive language used by unscrupulous marketers in the financial advice industry to build excitement that often results in risky behaviour and a short-sighted outlook.

In this blog post, I’m going to explain how financial porn works, what you need to look out for to avoid it, and 5 ways you can break the addiction to financial porn if you’re caught up in it.

How Does Financial Porn Work?

Financial porn works by playing on your emotions.

It’s designed to evoke feelings of excitement, hope, and greed that encourage you to take risks you wouldn’t normally take.

It’s the reason why so many people get caught up in speculative bubbles like the dot-com bubble or the housing bubble.

The problem is that when you take risks based on emotions, you’re more likely to make bad decisions. And when it comes to investing, bad decisions can lead to big losses.

What’s more, financial porn is often used to sell products and services that are completely unnecessary or even harmful to your financial health.

For example, there’s a lot of financial porn around day trading and penny stocks.

You see, day trading is a high-risk investment strategy that doesn’t work for most people. In fact, studies have shown that less than 1% of day traders are profitable in the long run. The same goes for penny stocks, which are incredibly risky and often manipulated by insiders.

And yet, there are still countless courses, books, and newsletters peddling these strategies as the path to easy money.

What’s even worse is that many of these products are sold by people who have no idea what they’re talking about. They’re just looking to make a quick buck by preying on your emotions.

5 Ways to Break the Addiction To Financial Porn

Stick to the basics

All you need to know is the current share price and how it compares to the intrinsic value of the company. Everything else is hype and irrelevant.

Avoid language focusing on the price movement of a stock instead of the financial and competitive position of the company.

Avoid acting impulsively

It is always a bad idea to rush into buying or selling a stock based upon exaggerated statements like, “you are giving up a once in a lifetime opportunity”.

That is exactly what the advice-giver wants you to do. Let your emotions calm down, take a step back and if you have doubts, pass on it.

Turn off the TV and radio

The financial news tells you what is happening in the markets today. It will have no bearing on what will be 10 or 20 years from now.

Staying glued to the TV and Radio and basing your decisions on a single day in the life of a stock will surely lead you down the wrong path.

Invest in high-quality companies when they are undervalued

The best time to buy is when the media is reporting doom and gloom because of a short-term downturn in the stock of a high-quality company.

It may be down today, but over the long term, if you have invested in a high-quality business, the likelihood is that it will bounce back and you will be ahead of the game.

If it is too good to be true, it probably is

This may be cliché, but it is sound advice.

Nothing is ever risk-free and if someone is promising you quick returns at a ridiculously high rate (e.g. doubling your money within a month), walk away and do not look back. These promises are guaranteed to be nothing but financial porn.

Just following these five simple steps will already put you ahead of the game.