What is FUD?
Fear, uncertainty, and doubt.
FUD will make you a less effective investor.
This is a common investing term that is being used more often these days. That is because there is a whole internet of doubters and fearmongers that get our attention. In fact, the reason news media is so successful is because spreading fear and uncertainty gets views.
If you're looking for a definition of FUD, look no further because I'm going to break it down and talk about some real life examples of how FUD affects your brain. I'll also give you ideas on how you can combat FUD and don't allow it to affect you.
What a miserable thing we all have to deal with! Some people consume their evening listening to an entertainment platform that spreads fear about the stock market, cryptocurrency, and investing in general. The problem is it is good to know the facts, but it is generally twisted to be more sensational than it really is.
I'm not super interested in making this a political post, but we can all agree that news media on both sides is biased, and they are pushing an agenda. Add on top of that, we as humans tend to be attracted to big flashy news bits that state "STOCK MARKET CRASH LOOMING."
My bit of advice here is that you take all news media with a grain of salt and don't allow news media to affect your money habits. Emphasis on news media there. It is important to know about what is going on in the world; just remember the news media is sensationalized to catch our attention.
How to overcome FUD
The absolute way to defeat FUD is to be educated. If you know the ins and outs of your investment, you shouldn't be fearful and make emotional decisions with your assets.
Invest in what you know! A perfect example is something that is going on in my life. My wife's father is a general contractor, and he builds huge custom homes. She was in and out of spec home after spec home as he would build homes and sell them.
I was pretty worried about buying our first home because we bought a bigger home than I was comfortable with. Our budget could afford it, but to me, it felt like too much. I also grew up very poor, and she grew up very privileged. The thing is, my wife had a vision and knew that buying a home could lead to some major gains in our future.
She had knowledge about real estate that I didn't know. She taught me and got me on board with her vision. She educated me about real estate, and wow, it paid off. I finally got on board with buying our first home after I was educated on why it would pay off.
That decision led us to have 100k in equity in that home in two years. We moved and paid off all our school debt and both our cars. We now are debt-free and were able to lock down a lower interest rate on the new home. Our mortgage is lower than what we had in the previous house, and now we are debt-free.
The amazing thing now is that we are saving about $500 a month that now goes straight to our retirement accounts. If I had allowed the fear, uncertainty, and doubt I had to creep into my brain, I wouldn't have bought our first home in the neighborhood we did.
I forever have a new perspective on real estate. But more importantly, I have a new perspective on how the decisions I can make with my assets shouldn't be based on fear. They need to be based on calculated decisions based on my research and education on the subject.
Top of market FUD
This is a pretty common one that we all face. Let's talk about a year ago when the stock market was on an absolute parabolic upward trend. Would you have guessed the market was going to go up as long as it has? NOPE. There are a lot of people who let fear cloud their judgment with their investments.
Many people stopped investing or DCA (dollar-cost averaging) into the stock market. Those people were waiting for the crash. As of right now, the stock market is up 35% since last year. The average yearly return on the S&P 500 is about 9%. These years where the stock market does so well outperforms the years that it does poorly.
This is why it's so important not to let the fear of a future looming stock market crash affect your decisions to invest.
In fact, now that I'm debt-free, I do not fear a stock market crash at all. As weird as this may seem, I look forward to buying discounted stocks when it may happen. When you are prepared, the news media fear-mongering doesn't have a strong effect on your decisions. You stay cool as a cucumber.
Be the top 1% of retail investors.
Being informed leads you to making better decisions with your investments. Let's clear this up here, talking to your neighbor Joe who tells you to buy some obscure crytpo currency because he just got 100% return isn't doing research.
Before buying any stock I read all the company quarterly reports for the year and their latest yearly report. A look into the company history, I find out what other successful endeavors the leaders of the company has accomplished, and I look at the company numbers.
This might seem like a lot, but you get better at it. At first it goes slow and you don't know exactly how to read a company 10k or 10q. Understanding the numbers can seem daunting. There are plenty of Youtube videos teaching how to do this. Be patient with yourself but doing this will allow you to vastly outperform the market and other retail investors.
If you have this deep of an understanding of a company you will know what challenges they face, who their competition is, how much debt they have. These are the things you need to know before you start investing. Once you do this you'll have a new perspective that 99% of other retail investors don't know.
This will allow you to have a vision of where the company can go. Now once you know these things you can see big events that could launch the company stock to the moon. For example the company may talk about doing a super bowl ad on their company conference call that you can listen to and they are preparing logistics to prepare for the massive influx of sales. You'll see the potential and you can buy in before the company does well.
What tends to happen is that someone does the research and learns about a company and how it can do well, they buy in. Then later they tell their friend about it and by then, IT'S TOO LATE! You missed out. The point I'm trying to drive home is that if you're interested in beating the markets you need to do your research.
Once you do the research you won't have the same FUD creep into your mind when making the decisions on how you're going to invest. This same principle can be applied to any investment. You can do this with real estate, stocks, cryptocurrency.
Thank you all so much for reading, I hope you learned something. If there is anything you'd like to add, leave it in the comments and I'll update the blog and expound on it more. I appreciate you all!
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