What our client Jim wants to know is “What’s your take on the market?” Jim’s been watching from the sidelines for over a year now, with the majority of his long-term savings in a money market fund. He called a financial planner, concerned that he’d missed the rebound.

Jim pointed out that the market had “gone up about 30% since the lows.” 32% to be precise, based on the change in the S&P 500 index at the time Jim called. It was about two months after the aforementioned “lows.” Jim sounded like there was this great party that started a couple of months before he called, and his invitation got lost in the mail.

It’s unclear whether Jim retreated to the sidelines after getting hurt in the game or if he just pulled himself out for a breather. Either way, he seems ready to get back in. If he does his own research, he’s sure done a lot of it. He talks about how the markets have moved throughout different periods in history, and wonders if those precedents can be applied to today. Maybe he had some help compiling this data. In any case, at the end of Jim’s 30-minute call with the financial planner, he decided to stop watching so much television.

There’s certainly no shortage of information out there, and much of it can be very useful. But with the possible exceptions of wisdom, compassion and beauty, too much of anything can be harmful. So does the vast abundance of information regarding financial markets make Jim and the rest of us more in tune with what’s going on, helping us make good decisions for our own personal situations? Or does the volume of financial news and analysis make too many conservative investors hide under the covers–or maybe turn active traders into hyperactive traders?

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Does this mean we should stop paying attention to the world around us and seek to become ignorant of financial news and trends? Of course not. Ignorance is disastrous for different reasons; you have to know what’s going on in the financial markets, how it affects your finances, and what adjustments to make to your financial planning strategies. The key is managing the information and making it work for you rather than against you.

In Jim’s case, the massive amount of financial news he digests on a daily, sometimes hourly, basis is causing severe information overload–to the point that he’s no longer able to see the forest for the trees.

This information overload is causing him to ask the wrong questions and to focus on circumstances he has no control over, such as what the market is going to do over the next day, week, month or year.

Instead of trying to determine what the market is going to do, he should be focusing on what he wants to do with his savings, namely:

–What are his key financial goals, and when does he want to achieve these goals?

–How close is he to achieving these goals?

–How much more does he need to save to achieve his goals?

–And how much risk is he willing to take along the way?

Only then can he begin to develop a financial planning and investing strategy that makes sense for him. If his goal is short-term or if he’s very close to achieving it, then there is no need for him to take the risk of investing in the market. If, on the other hand, he has a long-term goal, such as retirement, and he’s significantly behind where he needs to be, then the only chance he will have to reach his goal is to put at least some of his savings in stocks, which typically outperform other investments over the long term.

The information overload has another dangerous consequence for Jim and for any of us caught in the throes of market-watching: It causes us to jump in and out of the market. While the strategy worked for Jim in 2008, since he pulled out before the market decline in September, it is a strategy that has proved unsuccessful more often than not.

Planners call this strategy “betting against the house.” Even if you make the right decision 50% of the time, you’d end up paying significantly more in brokerage expenses and possible mutual fund surrender charges–not to mention taxes–than someone who chose to stay in and simply adjust his or her investments to keep a reasonable asset allocation based on individual goals and risk tolerance.

And then there’s the ever predictable component of human nature: As investors, we tend to become greedy when the market is rising, investing more money at the top when stocks are high, then panicking and pulling out in a declining market–selling when stocks are relatively low-priced. Studies show that those who try to time the market get it wrong more often than they get it right–their returns before taxes and expenses are typically 1% to 2% lower per year than investors who buy and hold, and their after-tax net returns often trail by as much as 3% to 4%.

So the next time you catch yourself scanning the streaming stock-quote ticker, looking for what makes up today’s rendition of your portfolio, you can ask yourself how, if at all, today’s prices of those shares impact your goals. (Even though your first instinct may be to ask “Are those quotes in real-time?”)

In all fairness, it could be that Jim was leaving off the TV to save on his electric bill–a strategy straight from Budgeting 101.

Liz Davidson is CEO of Financial Finesse , the leading provider of unbiased financial education for employees nationwide, delivered by on-staff certified financial planner professionals.

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