The fear of investing is a very powerful barrier for a lot of people. With constant talk of stock market crashes and economic slowdowns, it’s natural to have a cautious approach. However, investing is still one of the best wealth builders available for the majority. It is important to consider facts over emotion when you formulate an investment strategy.
Face Your Fear of Investing
Just like any other activity that scares you, it is important to get to the root of your emotions. You need to give careful thought to why you have fear of investing. Your upbringing, culture, and experience are several factors to consider. How did your parents and grandparents feel about investing? Did you experience a severe market downturn that gave you heartburn? Do you feel that you do not have the skills required to be a good investor?
It’s important to give yourself a break. Unfortunately, we do not talk enough about building sound money principles. There is a stigma in our society about meaningful dialogue around personal financial management. Our culture is extremely secretive about discussing financial topics, even among families and married couples. There is a lot of fear and shame around money, so many people just avoid the topic altogether.
Despite those barriers, it is critical that you take ownership of your financial future. Good money management does not have to be difficult. If you build a foundation of investing a part of your earnings, spending less that you earn, and having clear goals for your money, you chances for success are fantastic. Let’s address some common fears that may hold you back from investing your money.
Managing the Fear of Risk
Risk is inherent to investing. You are probably familiar with the saying, “no risk, and no reward”. You may be afraid of losing a lot of money in the markets. That is when it is really important to examine data regarding investing. Yes, we have seen some very ugly events in the stock market in recent years. The roller coaster ride can be a little scary when you see the value of your portfolio drop. However, the data is clear that people who remain committed to the markets reap the benefit in the long term.
The stock market events of 2007-2008 still resonate with many of us. It was a terrible time period where a lot of people endured brutal losses in the stock market. However, those who remained committed to investing were rewarded with a 10-year run of impressive gains. There was a 324% gain in the total stock market over that period. Those who sat on the sidelines missed out on a remarkable opportunity to build wealth.
You might be afraid that you will lose all your money. Certainly, no one likes seeing the value of their portfolio drop. However, the majority of people lose money by selling out of fear. Time and patience are important qualities to develop. If you have a long-term goal for your money, there is no need to sell when times get tough. As recent history has shown, those who stick with a long-term view receive the rewards of the markets. Even in the worst of times, people with a diverse portfolio did not lose all their money.
It’s Complicated and Time Consuming
You might be afraid that sound investing is difficult and time consuming. It’s true that you need to spend some time determining your goals and risk tolerance. However, that does not need to be a difficult process. Investing is easier than ever, and there are investment products designed for people who want to keep it simple and easy.
It takes very little time to open an investment account. If you want to start an IRA, it will probably take you less than a half hour to establish the account and get started. Technology allows you to automate your savings and put it on auto-pilot. You can understand outstanding investment products like index funds and target date funds in a matter of minutes. Fear breeds procrastination, which can cost you thousands of dollars over the course of your lifetime.
40% of Americans do not understand how their investments are allocated. If you have a 401K or an IRA, you really need to take the time to educate yourself. Fear of the unknown is a powerful emotion, so if you have thousands of dollars tied up in something you do not understand, it’s natural to be afraid! Knowledge is power when it comes to anything. Make sure you are comfortable with your investment portfolio and it aligns with your financial goals. It is worth learning enough to be comfortable in order to address this fear of investing.
I Need Lots of Money to Start
Another myth about investing is that you need a lot of money to start. This is simply untrue. You can gain access to products like Exchange Traded Funds (ETF) with very little cash to start. There are financial apps available that allow you to invest very small amounts of money at a time. Wealth Planning is not only for the rich and affluent. All of us need to have a plan in place.
I know many examples of people with humble beginnings who have built wealth over their lifetime. It was done through disciplined spending and investing. Think of wealth building as a marathon, and not a sprint. The earlier you start, the faster you take advantage of compound interest and the time value of money. Even if you are starting late, you can still succeed and build a sound portfolio for your retirement years.
I’m Just Not Good with Money
The last fear I want to address is the fear of not being good enough with money. All of us make financial mistakes. It is simply a part of life. However, becoming good with money is just like any other skill. You need to face your fear and do it anyway. It takes practice and persistence. The good news is that it really does not have to be difficult! You do not need to become a Wall Street guru to be a really good investor.
The economic landscape is constantly changing. It is important to understand that you are in control of your financial destiny. You are worth the investment. As your skill with money improves, so does your confidence and outlook toward the future.
Conquer Fear of Investing – Financial Fitness for Life
It’s natural to have fear of the unknown. Fear also serves as a protection in many areas of life. However, do not let fear of investing hold you back when it comes to money. Don’t be afraid to start slow and build a solid investing foundation as you begin. If you need some encouragement to get started, join my free Financial Fitness Mini-Camp! Let’s get your finances into shape and build financial fitness for life.