Do You Have a Fear of Investing? 5 Steps to Get Over It
Doing anything new can be terrifying. Investing is no exception.
There are scary techniques to master, rules to follow, terminology to learn, and brokerage websites to navigate. Plus, the prospect of spending your money with uncertain return can be frightening.
But you can learn slowly and then advance as you overcome your fears.
For example, when I started riding a road bike (with cars and trucks passing me at 35 mph and faster!) I struggled with everything – how to dress, how to change gears, and more. There was so much to learn and do that despite the pleasure, I had intense anxiety, which sadly lasted for years!
I am much more confident these days and even coach others on techniques that have worked for me. Plus, I have benefited from the investment of time and money. I feel great, sleep really well after long rides, and have a wonderful set of friends who enjoy this sport.
Based on lessons learned from cycling, here are techniques I suggest for any new venture, particularly investing:
1. Invest after you have established your emergency (or opportunity) fund. You don’t want to go out and buy a $5,000 bike if you haven’t learned to ride one yet (or it’s been a while since you have worked out). Likewise, you don’t want to invest a bunch of money in stock if you don’t have your financial basics taken care of. Develop a healthy savings account first and then set aside money for investing.
2. Get started. The easiest way to overcome a fear and become competent at a new activity is to confront your fear and begin. Hop on the bike and start riding. You don’t have to be the first in your group to take off or the fastest down the hill. You can get going and still exercise caution as you develop your capabilities. For your first step into investing, for example, buy a stock of a favorite company you know is well run or purchase a market index fund that represents the majority of the U.S. economy, like the Schwab Total Stock Market Index Fund (SWTSX).
3. Invest periodically. Just as you’ll become a faster, fitter, and more skilled cyclist through training, you’ll become a better investor by investing regularly over an extended period of time. You’ll benefit from the discipline of setting aside money on a regular basis, plus be able to buy shares in good times (when prices may be higher than usual) and not-so-good times (when shares may be priced lower and are available at bargain prices).
4. Avoid extra costs. You don’t want extra items weighing you down on your bike, making you slow and clumsy. Likewise, you don’t want to pay extra fees and costs unnecessary to investing. Consider buying no-load, no-transaction-fee mutual funds or commission-free ETFs to allow all of your investing dollars to grow without the encumbrances of fees.
5. Get up after you fall down. There are two kinds of cyclists: ones who have fallen and ones who will fall. We all make bad decisions or reasonable ones that just don’t turn out the way we expected. Don’t let a drop in the value of your stock or mutual fund make you feel like a bad investor. Often, declines in the value of your investments are temporary; your investments may even jump in value the day after a big fall. But even if you discover an investment was not a good one, learn from your mistakes and keep improving your results.
That’s our Q to your A! Tell us what you think in the comments below.
Are you scared to invest? What is holding you back?
Have you become a successful investor? What techniques did you use to overcome your fears?