Investors, Beware the Pitfalls of Too Much Information

You may think you're taking in a stream of financial facts, but there's no way you can absorb everything at once.

If you're thirsty for financial news, you have plenty of gushing media fonts from which to drink. Consider the most popular fire hose of financial info: CNBC. Switch on the channel and at any given moment you may see four wonks expounding, three tickers streaming, two hosts a-hosting and exchange rates for the Indian rupee. And the hundreds of sources spewing financial factoids on the Internet can be equally overwhelming. Does this information help us make better investment choices, or does it just fool us into thinking we can?

It appears that the wiring in our brains enjoys the stimulation but processes it poorly. Even though you may think you're absorbing it all, there's no way you can take in everything at once, says Daniel Simons, a cognitive psychologist and coauthor, with Christopher Chabris, of The Invisible Gorilla: And Other Ways Our Intuitions Deceive Us (Crown, $27). "Attention is inherently selective—we can only take in a thin slice," says Simons. Absorbing so much information is difficult, and often it can't be processed properly. Chabris says the mind has a tendency to equate information, such as facts, with knowledge (expertise), which gives you "a tremendous illusion of knowledge."

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%
https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png

Sign up for Kiplinger’s Free E-Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

Sign up

To continue reading this article
please register for free

This is different from signing in to your print subscription


Why am I seeing this? Find out more here

Bob Frick
Senior Editor, Kiplinger's Personal Finance