Cover Stories

I love magazine covers about the markets and the economy.

Newsweek’s most recent foray into the dangerous territory of predictive covers comes in the April 19 issue, which boldly declares that America Is Back. In the cover article, Daniel Gross points to a number of positive (but short-term) indications that the economy is recovering: job creation, productivity and the Dow’s 70 percent rise.

Not long after the article was published, Henry Blodget and Mr. Gross had a great conversation on Yahoo’s Tech Ticker about the predictive value of magazine covers.

And here’s my word of caution: Be very careful about making investment decisions based on what you see at the newsstand. Magazine covers are not vehicles for investment advice. I’m sure ones like the Newsweek cover are not even intended to be investment advice. Maybe cover stories like these have good information, and it certainly can make for good entertainment, but I’m not sure what it all means for real people trying to make decisions about how to invest real money.

Let’s think about this for a second. If you sold when things were bad (Remember? Back when almost all the magazine covers were declaring the end of the world?), does the fact that Newsweek says “America Is Back” mean that it’s time for you to move your money back into the market?

If you’re considering getting back in because things look better, be careful. The fact that you sold when things were bad (many others did too) is valuable information that can help you avoid an interminably nasty cycle of buying high and selling low. No matter how good things look right now, the time will come when the market corrects again. What are you going to do then? Maybe what you learned about yourself when you sold the last time is that you should build your investment plan with less risk … permanently.

On the other hand, if you didn’t sell because you make your investment decisions based on your financial goals, does the fact that a magazine cover is now declaring that the coast is clear mean you should change your investment plan?

This is not meant to be a debate about whether now is a bad or good time to invest. The point is that it’s time we stop the cycle of selling low and buying high. It’s time we stop doing the same thing over and over, expecting a different result. It’s time that we get to a place where we just focus on our goals. Who cares what Newsweek says? Focus on your goals. Build a plan that has the best shot to get you there, and then turn all your attention to living now.

You will be happier for it.

This sketch and post originally appeared in the New York Times on April 19, 2010.