How to Get Over Your Fear of Investing
We all can be quite risk-averse with my money. Stocks can be overwhelming and confusing. People say to invest, but it can still feel confusing every time you try. It may seem like every financial article relies on other financial terms to explain concepts, and all the definitions are all just other financial terms. It can be easy to give up.
Friends may even say it’s too risky! But, once you get it, investing can be exciting.
Here’s how to feel less fear every time you invest:
1.Get educated on how investing works:
Bankrate conducted a survey in 2016 shows only 33% of millennials own stock. Out of the people that aren’t investing, 25% of millennials say it’s because they don’t know how.
It is completely understandable. It can be easy to get completely overwhelmed and discouraged. However, it’s easy once you get the hang of it. The lingo and financial terms can seem confusing – but the concept of investing is really simple in itself. You don’t have to learn every little thing about the market, but you need to have a basic knowledge and understanding. Once you learn this, you will be able to successfully invest in the market.
2.You don’t need to know as much as you think you do
You don’t need to learn every single thing about every single company in the market. There is something called an index fund that allows us to just make 1 stock purchase and have a diversified portfolio.
Warren Buffett himself said that the average investor not only doesn’t need to learn every in and out of every company but shouldn’t waste their time. Buffett suggests simple index fund investments for all.
*Check out our next post for everything you need to know about index funds*
Investing in individual stocks is why people think investing is “risky” and “hard”. Investing in index funds is neither risky nor hard.
3.You have enough money to invest:
Many people simply don’t invest because they think they don’t have enough money. The same Bankrate survey found that nearly 50% of millennials don’t invest because they think they don’t have enough money. But the fact is you don’t need that much money. Some stocks can be bought for quite cheap. And in the end it isn’t about the stock price but rather the ROI or return on investment. If you don’t have enough money for a particular stock, then save up until you do. Improve your spending habits to get you there.
4.Accept that the stock market WILL go down – but time resolves all issues
The stock market has crashed in the past and it will crash in the future but don’t let this discourage you. Here is a graph of the stock market.
At first glance it may look steady but if you look closely, you can see all the ups and downs, and the Great Depression between 1929-1933 as well as the more recent 2008 recession. However in the big picture, they’re just small blips. Every time there has been a stock market crash, it has come back up. If you have 20 years to let your money grow, meaning you’re under 40 years of age then time will be on your side. But if you are retiring in 10 years then put more money into bonds rather than stocks. They have a slower growth rate but are more stable.
5.Don’t check the stocks every day
You know now that the market will go down but your money will recover. You saw it yourself in the graph above. I know it’s still easy to panic but do not take your money out of the market. If you do this, you’ll miss all your returns. You need to trust the way it works and stop worrying about it. Warren Buffet held the same stocks for years. He buys index funds and keeps them for decades. Don’t have an emotional reaction to the stock market. That’s the best way to invest.
6.Remember that investing is not the same as gambling
It’s investing. That’s the difference. Making an investment for your child’s future is to help him succeed. In this context, investing is positive. If we say we are investing in stocks, people like to think it’s the same as gambling. This thinking is untrue and wrong.