Why Fear Investing? 4 Simple Truths That All New Investors Need to Read

In 2015, a study showed that a surprising 52% of American adults are currently not investing in the stock market. A subsequent 2016 study showed that a large portion of those Americans who are choosing not to invest are from the millennial generation, ages 18 to 34. In fact, 85% of millennial women do not invest their money, while 79% of millennial men do not invest. By comparison, these numbers are far higher than the corresponding numbers from previous generations. This means that a large part of the 52% of Americans who do not invest are some of America’s youngest adults. Interestingly enough, most of these same people also recognize that investing can be incredibly beneficial to a person’s net wealth. This begs the question, why are millennials overwhelmingly choosing not to invest their money?

The reason may be simpler than you think. When asked, most of the people who were surveyed mentioned one common deterrent from investing: pure fear. This fear manifests itself for many different reasons, such as the simple fear of losing money or the fear of being perceived as stupid for making mistakes. With that, we decided to clarify something. Is it normal to fear investing? Absolutely. But, should you fear investing? Absolutely not. Here are four truths about investing that all new investors need to know.

1. If you are nervous to start investing, you are not alone. It may seem pretty clear by now, but the fear of investing is not uncommon. Most people who want to start investing feel as though they should be more prepared than they are. This creates several inherent fears. For example, if you are young, you probably fear losing your money by making a poor investment. You might fear that your lack of knowledge will lead you down a path of poor investment decisions. You might not trust different brokers or investment platforms that exist. You may even be nervous that making an investing mistake could cost you your personal pride. If any of these fears resonates with you, we want you to know that you are not alone and that most investors start out with these same fears.

2. Investing has a learning curve.

This leads us to our next point: some of your fears might be justified. But, with a little bit of work, you will not always feel that way. Do you remember learning to drive or starting your first job? In your first few days or weeks of starting something new, you were probably nervous about making a mistake that could cost you big. For example, you certainly would not want to crash your car or make your boss angry. But, the more time you put into these things, the more comfortable you have become. Investing is the same way. The more time you put into researching investing platforms and different investments, the more knowledge you will have about them. Then, you will be able to apply this knowledge to make better decisions and feel more comfortable. This means that, with a little work, you will be able to get over your initial fears of investing. Trust us when we tell you that investing is not rocket science, even if it seems incredibly complicated now. Just like anything else, it is something that you have to learn.

3. Investing should be both separate from and connected to your emotions.

Yes, that is right. As you go down the road of making investment decisions, you will come to learn that investing will be tied to your emotions, but also separate from your emotions. This seems complex, but it really is not. What we mean is that, sometimes, you may have a personal connection to the companies that you choose to invest in. You may love a Nike product so much that you want to invest in Nike. This strategy is completely valid – if you love a company and think that other people will too, you can and should use your emotions to base your investment decisions.

That said, you should not let your emotions get too tied up in your investing decisions. For example, investors disagree on which companies are strong stock picks all of the time. Do not let the opinions of other investors embarrass you or scare you into changing your own investment intuitions. Follow your research and make your own personal investment decisions based on what you know.

4. Investing is not the same as gambling.

Finally, many new investors view investing in the same way that they view gambling. They think that investing is just another risky way to put their money on the line and pray for a good outcome. But, in reality, the two are not the same. One of the biggest differences between investing and gambling is the availability of information. When you try to pick a stock, you will find that company information is readily available and public. With that, you can learn as much about a stock’s history as you want and use that to base your decisions. This is very unlike sitting down for a game of poker, where you typically do not know anything about the table or your opponents. This means that you put your money down to gamble with far less information than you have when you enter the stock market. Trust us: this information can make all the difference.

Further, gambling has a time constraint, while investing does not. If you start losing money in a game of poker, it will be much harder to make that money back before the end of the game. On the other hand, you can hold your investments for as long as you see fit, in order to make up for any losses or to continue making any profits. Thus, you are freer in investing because the time horizon is up to you and you alone.

While it is true that investing can be scary to start, we hope that you can see that it will not always be that way. Like anything else, the biggest factor is learning as much as you can, as quickly as you can. By doing your research, there is no reason you can’t get over your fears of investing!

While it is true that investing can be scary to start, we hope that you can see that it will not always be that way. Like anything else, the biggest factor is learning as much as you can, as quickly as you can. By doing your research, there is no reason you can’t get over your fears of investing!