Why People are Scared to Invest

Investing can be a terrifying venture – especially if you have little or no knowledge of where to start.

Plus… the idea of spending your money with no “guaranteed” rate of return can be even more frightening.

I agree that it can be daunting. But I will also say that just like there is risk IN investing with no guaranteed rate of return, there is just as much risk in relying on the bank’s 1% interest (or, even less) for your retirement or kids college fund. 

To Invest .. or Not to Invest?

Should everyone have their money in the market?

That’s a question you need to ask yourself before you make the decision to live on the dangerous side with your retirement and perhaps, other investments. I asked myself that question a LONG time ago – twenty years, long before I was married to my husband.  But that might not be something you are remotely concerned about at this time in your life.

If you aren’t, just remember that the earlier you start, the more “time” you have on your side.

Before you even consider investing, you need to take a few things into consideration – 

#1 – Ensure you have a fully funded 6 months of emergency savings

#2 – Determine if you are maxing out your retirement accounts (have a 401K at work? It’s a wise place to start!)

#3 – Do you have debt? If you do, you need to pay down/off your high interest bills first

You also need to take into consideration your time frame for investing – when do you want that money?   If you are looking at retirement, you might just have 25-30 years, if not more, to let that money do it’s thing. But if you if you are investing short term (perhaps for a home or a home down payment) you might have just a few years.

Many Americans think that investing is out of reach for them – in turn, they look at the lottery as their best chance of accumulating a nest egg of a few {hundred} thousand dollars.  Guess what? The average household in the U.S. spends $550 a year on lotto tickets (while more than 25% of those same folks have less than $1,000 saved for retirement).

Want to know a secret? I have never purchased a lotto ticket, and if someone told me to go get one, I would not have a CLUE how to buy one. I really just don’t know – no idea in the least.

So why do people avoid investing?  There are many reasons honestly, it could be money, or risk, or even time – some people might just be procrastinators and that procrastinating has led them to lots of wasted years.

This week I have spent at least 4 hours on the phone with my own investment advisor – reanalyzing our investments – not just our retirement accounts, but our kids investment funds for college. Not only was it easy (well, not as “easy” as I would have liked – the kids got into the pantry, and my 2 year old stuck silly putty on the vaulted ceiling)… but making the TIME to do it was key.

My husband, on the other hand, is a procrastinator – and while that can be a good thing in some cases…. when it comes to putting money away, an earlier start is better than putting it off.

There are a multitude of reasons many people avoid even getting started – and while we can’t account for them all per-se, here are 5 that come to mind:

#1 – Lack of Money to Invest

This comes down to one thing: priorities.  For some, saving for retirement is a priority – you work hard, you pay bills, you pay for food, insurance, etc. … why not pay yourself FIRST?

It doesn’t take much at all – making a monthly commitment to setting aside a little bit, that will do it’s thing over time.  Can’t afford to spare even just $25 – $50 a month? Then in that case, wait until you get a raise and then get started. OR, cut your budget by eliminating one of your many trips to Target – trim your cable bill so you can squeeze out $25 or $50. Once that savings starts to grow, you will get motivated to continue. 

Not to mention if you have that money coming out by a draft from your bank, eventually you might even forget about that drafted amount and over time, notice how quickly it will add up.

#2 – Lack of Knowledge about Investing

If you are starting small, you really don’t need too much knowledge at all. There are a myriad of online sites to help you learn… and banks that allow you to get started in retirement accounts (Roth or Traditional IRA) very cheaply these days – some with drafts each month as low as $25. In fact, many of these banks will help provide counsel should you express interest to get started.

They’ll even offer to check out the rest of your finances at the same time to see if you need any help in other areas.

#3 -The Market is Very Risky

The best way to deal with risk is to accept several kinds of risk – and while investing may have it’s own set of risks, just as risky is to avoid investing altogether.

Market turns are inevitable – and in many cases, unexpected and scary for some. But at the same time, keeping your money in bonds or cash for 30+ years isn’t going to help generate wealth for you either :)

Sure, there is risk in investing – but you aren’t going to be losing anything unless of course you pull all your money out when the market IS struggling. Long term, the economy is bound to bounce back – until it does, you should be excited that there might be a down time when your money can buy “more” for yourself. Then later on, when the market is in a better place, your investment value will increase.

Putting your money in the bank or in bonds with a 1% rate of return (or less) isn’t keeping up with inflation – so you are already at a loss.

#4 -Wait – aren’t there High Fees?

There are bound to be some fees – but if you are concerned about really high fees, that means you are knowledgeable enough to ask about them – right?

The best thing to do is to stick with low cost starter funds – which usually have some pretty low fees. 

#5 – Inability to Trust your Investment Advisor

As mentioned before, you don’t have to sit in front of a fancy advisor who wears a suit and tie – you can, but it’s really not needed. It doesn’t take a trip to an upscale office to start a basic portfolio.

In many cases, you can seek help from your local bank – even if you can’t go in physically to a bank, you can take care of opening an investment online or over the phone – in your pajamas and slippers. 

Many banks have online advisors in the Investment and Securities field that will gladly help you get started in a basic portfolio – or, even help you open one for your children.