Investing in the stock market can yield rewarding returns and help you secure a comfortable retirement. But many are afraid to make the leap into this realm. In fact, a recent survey conducted by GOBankingRates claims that 55% of Americans aren’t investing in the stock market. Getting started is often the biggest hurdle. Fear of losing money, making mistakes and not knowing where to start are also contributing factors. Here is a breakdown of some of the most common fears of investing and how to overcome them.
No one wants to see their hard-earned money evaporate. For this reason, the fear of losing money is at the top of the list. There is an equal amount of bad investments as there are good ones, and the markets are constantly fluctuating. In short, you’re going to have to assume a certain level of risk when you invest in the markets.
Setting long-term goals can help lessen the blow of the daily ups and downs of the markets. Having a sound strategy and sticking to it is another. Don’t chase the hot tip of the day. Invest in sound stocks and funds that have a solid track record of delivering consistent returns. If you do feel the itch to do some trading, then make sure it represents a small percentage of your overall portfolio, and make sure that you can afford to lose it.
Not Having the Money to Get Started
It is common to think that you simply don’t have enough money to start investing in the stock market. In the past, this was partially true, as there were barriers to entry to investing. High commission fees and large minimum investment amounts kept a lot of would be investors on the sidelines. The environment is much more friendly today, however. Most online brokers allow you to get started with no minimum, and commissions on trades are a few dollars or even free.
Remember that this is a marathon not a sprint. A few dollars are all you need to get started. Add money as you advance in your investing knowledge and as you increase your income. If you are young time is on your side.
Not Knowing What to Invest In
Investment choices are overwhelming, to say the least. There seems to be an endless array of stocks, bonds, mutual funds, and ETFs to invest your money. How do you know where to even start? This may be the most difficult part of investing. Separating good investments from bad ones takes a great deal of self-education and a lot of time to learn the ins and outs of the investing world.
There are endless books and websites that you can turn to in order to start learning about all things investing. You can also acquire the services of a financial advisor who can help you navigate the waters of the markets. I’d suggest finding an advisor with a good reputation and who has a history of good returns and satisfied clients. Ask for references and make sure all fees are presented up front.
Making mistakes are part of life. But when those mistakes could cost you money, then they become scary. No one wants to lose their hard-earned money due to a bad investment. We’ve all heard the stories of people losing everything to the likes of scammers like Bernie Madoff and companies like Enron. The thought of your nest egg evaporating before your very eyes is terrifying to say the least. So, how can you overcome this fear?
Knowledge is power. Knowing what to invest in and knowing and trusting your financial planner, if you have one, can be the difference between a comfortable retirement and not being able to retire at all. This ties back to educating yourself when it comes to investing and with doing your due diligence before hiring the services of a financial advisor.
Invest only in what you know and understand. Don’t speculate with investments that you don’t have an in-depth knowledge of. Also, don’t let anyone else talk you into potentially risky investments that you aren’t sure of or haven’t done your homework on.
Money will treat you well if you treat it well. Don’t neglect your investments. You are in this for the long-term, but that doesn’t mean that you should pick a few stocks and funds and ignore them. You should be evaluating your investments and your portfolio quarterly or at least semi-annually. Make sure that your investments are performing, that your allocations are in check, and that your portfolio is growing so that retirement will be on time and comfortable. A good financial advisor will be doing the above for you. But you can do it yourself if you have the knowledge.
Here are a few other common reasons people don’t invest.
People often believe that they will have a much lower cost of living in retirement. This fact coupled with their Social Security benefits should be all that they need when they retire. But, is this true? To a point there is some truth to this. But Social Security was designed to provide basic living costs. It was never intended to allow one to flourish in retirement. Some of your expenses will be lower in retirement, as the children will be grown up and moved away, your mortgage will be paid off, and other debts will likely be paid off as well. But you must consider health care costs, and if you want to do any travelling or buy any luxury items, then Social Security isn’t going to provide for you.
Younger people will claim that saving for the future is foolish because the future is uncertain. You should live life for today to the absolute fullest. If you don’t think this is an issue, then take a look at how many people are drowning in credit card and auto loan debt because they were busy living for today, buying things that they couldn’t afford, and not thinking about the future. While you should enjoy life, you also need to plan for an inevitable future. Some small sacrifices today can yield rewards in the future.
Lack of time rounds out our list. Many people claim that they simply don’t have the time to invest their money. As stated early, you need to pay attention to and do regular check ups on your investments. But you don’t need to dedicate hours upon hours to it. A few hours a couple times a year is all it really takes.
Investing in the stock market can be a scary thing especially if you are new to the investing world. Things can quickly become overwhelming, but with a little research, education and assistance you can start investing with minimal money and risk. Remember, not having the money to secure your future is much scarier than not making the leap into the investing world today. Do your research, learn, acquire professional assistance if needed, and start investing today!
The views of the author of this article do not necessarily represent the views of Gradifi. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here. Readers should consult their own attorneys or other tax or financial advisors to understand the tax, financial and legal consequences of any strategies mentioned in this article.