In this column I dig into a Management Science study that challenges the idea that more data leads to better investment decisions. When Yahoo Finance shut down a free raw-data service in 2017, researchers expected affected traders to suffer. Instead, their results improved. With less information to sift through, these investors made fewer trades but the trades they did make were better. The data overload they were previously living in had been fuelling three familiar illusions: the illusion of knowledge, the illusion of precision and the illusion of control. In other words, more data had been giving them more ways to feel confident without being more correct.
I also reflect on what this means for everyday investors who are drowning in alerts, notifications and market commentary. The most successful people I meet tend to focus on behaviour, not dashboards. They automate savings, follow a simple plan and ignore the firehose of short-term signals that tempt us into bad choices. In the column I make the case that tuning out the noise is not laziness, it is strategy. A solid financial plan and a basic investment policy statement can do far more for your long-term results than another dozen charts. Instead of chasing a thousand tiny levers, most of us would be better off pulling the three or four that matter.
Preet Banerjee
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