You’ve probably heard a lot about the disease that kills approximately 600,000 people in the United States every year, according to the Centers for Disease Control and Prevention. You’ve probably also heard more than a little about two other diseases that together kill more than 50,000 people annually.
Neither disease is Ebola, despite the coverage that it has received in the news recently. No, the leading cause of death in the United States is heart disease. The two other diseases I mentioned are flu and pneumonia. Simply getting a flu vaccination not only decreases the risk for contracting that virus, but also makes it less likely that a person will develop flu-associated pneumonia.
Ebola in context. So far, only two people have contracted Ebola on U.S. soil. They are nurses who were treating an Ebola patient. The most common way to contract Ebola, according to the CDC, is to come into direct contact with the bodily fluids (blood, vomit, urine, sweat, spit or other fluids) of a person who is sick or has died from Ebola. You are also at risk if you come into contact with objects contaminated with the virus, such as needles or medical equipment, and by eating infected meat or by coming into contact with the blood or fluids of infected animals.
In contrast, it’s much easier to contract influenza, which is a virus that can spread through the air.
There is a marked difference in the sanitary conditions in Africa (where Ebola is thriving) and in the United States. According to Frank S. Rosenblum, M.D., in an Oct. 4 article in American Thinker, Ebola thrives in “dirty, crowded environments where there is open sewage, and uncontained waste.”
It’s highly unlikely there will be a widespread epidemic of Ebola in this country, which has excellent sanitation and world-class health facilities.
The anxiety-producing role of the media. News of Ebola is dominating the media. Minuscule details of those unfortunate enough to be victims of this virus are repeated endlessly throughout the day and evening. Little mention is made of the fact that the first two patients treated in the United States for Ebola have recovered.
I am aware of no credible expert who believes the spread of Ebola in the United States could even approach the number of people lost to suicide each year (around 40,000). I have seen little media coverage recently about ways to reduce the number of deaths from cancer (almost 600,000), chronic lower respiratory disease (more than 142,000), stroke (more than 128,000) and diabetes (almost 74,000), according to the CDC. Each of these conditions represent a far more serious threat to your health and safety than Ebola.
Why isn’t the media instead more focused on these far more pervasive conditions and giving you advice on how to avoid them? Because fear sells.
The market “correction” in context. Year-to-date (Oct. 11, 2014), the Dow has lost 1.54 percent. But over the past year, it has gained 8.78 percent.
With rare exceptions, no competent financial advisor would advise client to invest 100 percent of their portfolio in mutual funds that track only the Dow Jones Industrial Average index. A far more typical recommendation would be an asset allocation of 60 percent stocks and 40 percent bonds.
Consider the historical returns of three index funds I discuss in my book, “The Smartest Investing Book You’ll Ever Read .” Let’s use them to create a model portfolio with an allocation of 60 percent stocks and 40 percent bonds. In our example, 70 percent of the portfolio’s stock portion is allocated to the Vanguard Total Stock Market Index Fund, 30 percent of its stock portion is allocated to the Vanguard Total International Stock Index Fund and 100 percent of its bond portion is allocated to the Vanguard Total Bond Index Fund. The portfolio is rebalanced once or twice a year to keep it in line with an investor’s risk profile. It would have earned the following average annual returns (geometric) over these time periods:
— 1970 to 2013: 9.71 percent
— 1994 to 2013: 7.75 percent
— 2004 to 2013: 7.11 percent
— 2009 to 2013: 12.02 percent
These past returns are not predictive of future returns.
The anxiety-producing role of the media. Instead of focusing on the overwhelming evidence that supports investing in a globally diversified portfolio of index funds, the financial media is intent on creating anxiety and panic. Here’s a tiny sampling of its steady stream of musing and speculation:
— recommendations for stocks to own in anticipation of a “market sell-off.”
— articles instilling fear about the correction
— articles suggesting diversification doesn’t work, based on short-term data
— articles giving various theories for why the market will continue to rise
— articles suggesting now may be the right time to consider buying gold
The bottom line. No one knows whether the markets will tank or increase in value. Basing decisions on the musings of financial pundits, who have no accountability and little to no data to support their views, is not an intelligent and responsible way to invest.
Whether discussing Ebola or investing, the media provides a skewed and unrealistic view of the news, geared to keep you watching. Doing so can be harmful to your financial well-being.
Dan Solin is the director of investor advocacy for the BAM ALLIANCE and a wealth advisor with Buckingham. He is a New York Times best-selling author of the Smartest series of books. His latest book is “The Smartest Sales Book You’ll Ever Read.”
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What Ebola Can Teach You About Investing originally appeared on usnews.com
