This post was originally published on this site
This article is reprinted by permission from NerdWallet. The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.
“FUD” is a shorthand term for a concept in business known as “fear, uncertainty and doubt.”
The phrase is popular in the tech sector of the stock market and among cryptocurrency enthusiasts. When someone uses the term FUD, they are most likely criticizing what they see as bad faith or uninformed expressions of bearish pessimism.
For example, one user in Reddit’s popular “CryptoCurrency” forum offered an anti-FUD rejoinder in January 2022, when the crypto market had slipped substantially off its highs from the prior year.
“Who else is ignoring the FUD and feeling really bullish on crypto for 2022?” the post said. The writer added, “I’ve been in crypto for a few years and I’m hearing the same tired excuses this January that are repeated every time the market dips/corrects/crashes.”
Is this FUD … that I’m feelin’?
Being on the lookout for FUD might help you if you’re prone to overreacting to news that might affect your portfolio. But on the other hand, investors should be careful not to minimize the significance of new information that might challenge their prior assumptions.
It’s good to keep a level head when it comes to investing. And that’s especially true in a volatile space such as the cryptocurrency market. However, if you take the time to identify your financial goals and plan to reach them, you may find that you’re more confident in handling unexpected developments.
Here are a few things to consider when you’re facing down FUD.
FUD: A breakdown
Fear, uncertainty and doubt are normal emotions when dealing with investments. It’s your hard-earned money, after all.
Fear
Fear is the principal component of FUD. Some have suggested that FUD is the opposite of FOMO, or fear of missing out. Sufferers of both FUD and FOMO feel anxiety about their investment decisions. When you have FUD, you might think it’s time to sell your investments; you might be predisposed to buy when you have FOMO.
Fear can lead to rash decisions that you might later regret. If you’re feeling worried about your portfolio, or even a specific component of it, a financial advisor may be able to help you make a more cool-headed decision.
Investing can also be less scary when you have your other financial bases covered. Generally, it’s not a good idea to invest money you think you might need in the short term. A healthy emergency fund and a good retirement plan can take some of the stress out of investing.
Uncertainty
There’s no such thing as a sure bet in investing. Nearly every asset in your portfolio will experience some degree of volatility, though some are less risky than others.
Bonds, for instance, tend to have more predictable returns over time, but they often appreciate more slowly than other investments might. On the other hand, products such as cryptocurrency and individual stocks may have wild swings in value, potentially bringing larger rewards.
The best way to minimize risk and stay on track with your investment goals is to spread your money across several asset types. Then within each asset class, you should have a diversified set of investments. That way, a development that affects one particular area of your portfolio will be less likely to create broad uncertainty.
Diversification can be a particular challenge for crypto, a relatively new investment class that does not generally offer funds containing a package of different assets. But some advisers are beginning to help clients with crypto diversification.
Read: No matter your age, here’s how to tell if your finances are on the right track
Doubt
New information can make you reevaluate your financial situation. That’s not necessarily a bad thing. But when doubt starts to creep in, remind yourself why you made an investment decision in the first place.
If you’re investing for the long haul, you probably have an idea of why you believe your investments are likely to increase in value over time. A news event that causes a temporary decline in value might not say much about what will happen five or ten years from now.
In crypto, there’s a particular term for taking a long-range approach to investment. HODL, which began as a misspelling of the word “hold,” is an article of faith among many investors. A recent international survey by the cryptocurrency platform Gemini suggested that close to 80% of crypto owners buy and hold it for its long-term investment potential.
Also see: 8 simple rules to maximize wealth—at any age
One thing you can do when you are feeling doubt is to look back at your thesis for investing and decide whether you still believe in that reasoning.
If something has happened to make the prospects for your investments dimmer, there’s no shame in reevaluating. But if your overall philosophy hasn’t changed, there’s no reason to give in to FUD.
More From NerdWallet
Andy Rosen writes for NerdWallet. Email: arosen@nerdwallet.com. Twitter: @https://twitter.com/andyrosen.
