Hey, everybody’s got their fears. Afraid of spiders? Afraid of the dark? Personally, I’m afraid of heights.
Fear is a natural reaction to the unknown…so it’s no surprise that a lot of people have a fear of investing.
But as I’ve said time and time again, investing is the most effective way to build wealth.
Today, I’m going to help you crush any fears that are keeping you from investing so you can start growing your money and creating the life you want.
Investing Fear #1: I don’t have enough money to start investing
How much do you think you need to start investing? $10,000? $1,000? Not true. You can start with as little as $50.
With ETFs and fractional shares, you don’t have to have a lot of money to start investing. The important part is getting started.
See, people don’t invest because they’re rich, they become rich by investing.
So rather than waiting until you feel rich to start investing, start now.
As long as you have…
- Paid off your high-interest debt (meaning any debt with an interest rate above 7%)
- Saved up at least 3 months of expenses in an emergency fund
…you can start investing and growing your money.
Any money that you’re able to save each month after you’ve completed those two steps, you can start investing. Even if it’s just $50 a month. So stop thinking you don’t have enough and get started!
Investing Fear #2: I might lose money
I hear from women all the time who are afraid of losing money if they invest. But here’s the thing: you are guaranteed to lose money if you DON’T invest.
The average rate of inflation is 3%, and more recently it’s been closer to 8%! If you keep your money in the bank, which averages a less than 1% return, then you’re immediately losing money every single year. How? Because your money is growing at 1% while the prices of everything else are increasing at 8%, so the value of the money in your bank account becomes less and less over time.
Plus, if you’re not investing, you’re likely not thinking about retirement, which means you may have to work well into your golden years or you’ll be reliant on other people to take care of you.
All that said, investing doesn’t have to be risky.
The stock market isn’t like playing the lottery; it isn’t all up to dumb luck. You can invest in a strategic way that minimizes the chances that you’ll lose money.
For example, don’t invest in single stocks. Invest in ETFs or target date funds. That way, your money isn’t tied up in the success of a single company.
Stocks are risky. Investing is not. If you take anything away from this article, I hope it’s that.
More investing mistakes and how to avoid them!
Investing Fear #3: The stock market might crash
I’m not going to lie; the stock market may crash – it’s happened before. The good news is that historically the stock market has always recovered. So, even if the stock market crashes, as long as you keep your money in, you’re very likely to make your money back - and more - over time.
We saw this in 2008. When the stock market crashed, a lot of people panicked and pulled their money out. But if they had just left their money in, their investments would be worth triple today.
That’s why we say you should plan to invest for at least five years. That gives you time to build a strong return on your investment.
So, if the stock market crashes, that’s ok! Just don’t panic and don’t pull your money out. Stay invested and use your emergency fund if you have to.
Investing Fear #4: Investing is too complicated
Investing in the stock market doesn’t have to be complicated. People tend to overcomplicate it. You hear a lot of jargon thrown around and it feels overwhelming. That’s because financial advisors want you to feel like you can’t do it on your own and you need to hire them.
But that’s not true. You can easily do this on your own.
In fact, we have a article on everything you need to know to start investing today – it will teach you everything you need to know in less than 8 minutes.
Investing Fear #5: Investing is too time-consuming
When people think of investors, they tend to think of men in three-piece suits glued to screens and yelling into phones all day long.
And there are people – like day-traders and hedge fund managers – who make managing stocks their full time job. But that isn’t the reality for the majority of investors. In fact, it isn’t even the smartest way to invest.
Very, very few active traders manage to time the market well enough to gain any sort of financial advantage.
If you want to get the highest rate of return on your investments, the best investing strategy is buy-and-hold. And it works exactly how it sounds – you put your money into an investment and hold it for at least five years…ideally longer.
I don’t even suggest checking on your investments more than once a quarter, because depending on what the market is doing, it can make you tempted to withdraw your money, which will set you back financially.
Investing Fear #6: I don’t know how to pick stocks
Like I’ve said before, you shouldn’t invest in single stocks. Instead, invest in ETFs, target date funds, or mutual funds, which are bundles of stocks.
Enjoy these step-by-step tutorials on how to pick ETFs and how to invest in ETFs!
And if you want to go the easiest route, just choose a target date fund based on your expected retirement age, invest your money into that, and call it a day!
Investing Fear #7: What if I can’t time the market?
People are always trying to figure out the best time to jump into the market so they can buy stocks at the lowest possible price.
But honestly, that’s not the most effective approach to investing.
Few investors have been able to predict market shifts with such consistency that they gain any significant advantage over the buy-and-hold investor.
Plus, it is a high-stress and high-risk strategy. Bank of America did a study evaluating the stock market all the way back to 1930 and discovered that if an investor missed the S&P 500′s 10 best days each decade, the total return would stand at 28%. If, on the other hand, the investor held steady through the ups and downs, the return would have been almost 18,000%.
Historically, the stock market has always gone up over time, so you can make more money – with less stress – by holding your investments for 5+ years than by trying to ride the highs and lows of the stock market.
It’s better to just get started than wait for the “perfect” moment. So, instead of trying to time the market, make a plan and invest as soon as possible.
Investing Fear #8: I don’t understand investing enough to make it work
You don’t need to understand all the stock market jargon to make investing work for you.
I’ve already said some of these, but to sum it up, here’s an overview of everything you need to know about investing to in order to succeed:
- Don’t invest while you have high-interest rate debt (meaning debt with an interest rate over 7%, like credit card debt) or before you have an emergency fund
- Don’t invest in single stocks
- Leave your money invested for at least five years
The most important thing, when it comes to investing, is learning how to think like an investor.
Mindset matters just about as much as anything else, so if you want to learn more about the mindset required to build wealth, which you can learn about in our free masterclass. Check it out!
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