Don’t Believe All The News

trump-fake-news

One of the hardest things I’ve learned while on my quest to achieving financial independence is how to avoid all the news. Everyday we are inundated by news articles stating the “facts”. Browse Facebook, LinkedIn or even look at the home screen on your Android phone and you’ll know what I mean.

It’s not hard to find headlines that will scare you. “Market melts down”. “Stock market crash looks similar to 2008”. It only takes 24 hours later to see the opposite. “Stocks surge after blow out jobs report”. “Markets up 700 points”. This is how the media makes money, by creating articles that grab on to your emotions.

This is no different when dealing with money matters in life. Remember that everyone is trying to get your dollar. Your bank adviser, your lawyer, your real estate agent and yes even your doctor. That’s why it’s so important to educate yourself in all things finance so that you are prepared when you talk to these “professionals”.

The Stock Market

I’m not a stock trader or a broker. Nor do I don’t work for a financial institution that sells mutual funds. I don’t get anything for telling people to invest using a balanced portfolio. I’m also not entirely sold on the stock market as the best investment choice. Despite what I write, I’m not against home ownership either. I strive to achieve financial independence through proper budgeting and understanding the fundamentals of personal finance.

What I don’t subscribe to is the propaganda that we see in news media over the stock market. The job of the media is to sell ads. If you click on a news article it makes them money. Media, especially financial news, love to use hyperboles. That’s why we see fear mongering articles when markets go south. When markets are rising we see articles stating stratospheric projections. Oh the euphoria! All of this is just noise and I have learned to ignore it.

One of the things that I’ve understood about the stock market is that it doesn’t always go up. It also doesn’t crash to zero either. Through my 15 years of investing I’ve experienced the 2008 crash, I’ve seen the impact of 9/11 and I’ve enjoyed a decade long bull run. All throughout this time I’ve witnessed how Internet articles can have an adverse affect on people’s investing thesis and technique.

Money is emotional. Let’s be realistic about ourselves. Greed is probably the worst human trait that we exude. This is why when we see stock recommendations we have the urge to buy. Jim Cramer comes to mind when I think about celebrity stock pickers. He rants and raves and wants to get you excited about investing. Sure he might have been successful in the past, but nowadays he’s just a celebrity trying to stay relevant by picking stocks. I can probably do better at the roulette wheel.

All you need to know about being a successful investor is to stick to your goal. Don’t deviate with the plan that you’ve made for yourself. There’s always a better time to invest. There will always be a better time to sell, but those random events along the way is just noise over the long run.

Fundamentally, the stock market is always going to reflect the progress of humanity. There is only a finite number of resources in this world. All of these resources are valued at a certain amount and thus value can only grow so fast. Yes, there will be exceptional winners and there will be losers, but these are things we shouldn’t concern ourselves with. All we need to know is that the human race is progressing and thus the economies will continue to slowly grow. The stock market will follow.

Real Estate

toronto-real-estate

If you thought stocks make people emotional, then real estate is probably worse. Real estate has always been at the forefront of everyone’s mind as the best investment choice. Over the long run real estate has been able to hold onto it’s value and provide stability, but has never exceeded the total gains of the stock market. That’s just a fact.

Nowadays real estate has almost become a fad or fashion. FOMO is all the rage. To top that off are all the players who are trying to capitalize on this trend. Real estate agents, staging companies, renovation experts and mortgage brokers to name a few. Since the market for money in real estate is so lucrative, it’s no wonder we have many people who want to manipulate consumers to ensure a stable and profitable environment.

Take for instance this blogTO article on the ridiculous rent in Toronto. Yes $1900 for 227 sq ft is ridiculous, but that doesn’t reflect the real world pricing. Toronto is expensive, but not Hong Kong expensive. For similar money, it’s still possible to get a 500+ sq ft place. These sensationalized articles make it seem like the market is crazy hot and that rent is going to skyrocket to $4000 for single bed condos. Toronto is not San Francisco. Toronto doesn’t have median incomes over $100k to support this kind of pricing. At the end of the day, it’s fundamentals that determines rental pricing.

News outlets for real estate will always want to spin a positive vibe for housing. That’s because those that pay for the advertising in newspapers are developers and real estate agencies. Articles can sometimes be disguised as paid for advertisement. This is why you can’t believe everything that you read. You need to do your own research to determine the trends before making a proper decision.

With TREB losing it’s battle in the Supreme Court of Canada, real estate figures and numbers can now be collected and analyzed by third parties in the Toronto and Ontario. Data will no longer be controlled by a cartel that wants housing prices to only go up. We can probably expect similar rulings in other jurisdictions and the general public will be provided greater access to data to make their own decisions.

It’s hard to pinpoint prices for homes. That’s because as homes sitting on land, they don’t produce value to the economy. Essentially homes are fixed assets that are built and lived in. They depreciate, yet we as humans put a value to it. This value is generally arbitrary and determined through supply and demand. Supply can be manipulated by government and developers, but demand is generally just through emotions. With emotions it’s always hard to put a dollar amount on it.

Do Your Own Research

Rather than reading articles posted on Yahoo or Google, the best thing to do is perform your own research. There’s plenty of data out there that can give you analytical evidence. This way you can make your own judgement based on your own analysis.

News outlets will often exaggerate economic events. The best indicators for economic health come out of the Bank of Canada. Go read publications that come from their site. If you’re still skeptical of numbers Statistics Canada always has some numbers to look at to crunch. Figuring out the state of the economy is not as hard as you may think. You don’t have to read the Globe and Mail to figure it out.

Real estate is still much harder to get information on because prior to the end of last year there were publication bans on most of it. There are still plenty of competitor sites to realtor.ca like Zolo and Listings.ca that provide statistics on selling price. These are just some of the places you can start looking. No doubt by year end we’ll start seeing more independent sites. Real estate statistics is a big money making business.

What this really means is that we need to be selective in the data that we read. Additionally, learning about finance takes time and effort. I’m a firm believer that being successful with money means that it’s necessary to learn about money. The unfortunate truth is that Canadians severely lack personal finance education.

It’s up to us to be proactive in learning and “figuring it out” so to speak. It’s unfortunate that we were not taught all these things when we grew up. The education system failed us and put it in a situation to fail. But it’s not too late to learn. Just start reading more. Pick up the books. You too can be on your way to financial independence!

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