Investing · Personal Finance

Don’t let but’s hold you back!

There is a general awareness that saving and investing is a good thing to do, likely advice you’ve heard you should do but don’t know why (like making up your bed daily), but there is real fear around getting started. Some of those fears are fueled by misconceptions. As a result we think, it’s too risky and I want nothing to do with it.

Yet, we take risks every day; without realizing we also take steps to modify those risks. Every time you drive your car you risk getting into an accident but to lessen that risk you wear your seat belt, you use your turn signal and pay attention to your surroundings. You don’t stop driving altogether. Yet when it comes to investing many people let fear keep them out of the market. I won’t ignore the fact that there is inherent risk in investing but there are a number of steps you can take to take the fear out of investing. Below I address the three most common fears that hold people back from building their wealth and how you can modify your risk.

Don’t let these but’s hold you back!

    • But I’m gonna lose all my money in the stock market!
      • Historically, the stock market returns an average of 7%. This is why investing is a long term game. From day to day and year to year, the market’s performance fluctuates and that depends on a variety of factors. Time is your best friend when it comes to investing; the more time you have to keep your money in the market the more risk you can take and the higher the return you can expect.
    • But how do I know how much is enough to start with?
      • I recommend investing when you have disposable income. This is money that you do not depend on for basic expenses (ie. rent, food) or paying debt. The amount is irrelevant as there are investing platforms that require no minimum deposit or deposits as little as $10. The more important thing is to get started.
    • But am I making the right choices?
      • Ok, you’ve decided to invest, you’ve opened an investing account and now what? This is a legitimate concern as there are a million investing options and they can be hard to differentiate between without the right information. My first recommendation is find a professional, either hire a financial advisor or choose a robo-advisor platform to make these decisions for you. If you prefer to DIY it, first decide your risk level and then do your research. The rule of thumb is 110 – your age = the percentage of your portfolio that should be stocks. For example, a 30 year old would have a 80% stock/20% bond allocation. Your account should also be diversified with a mix of domestic/international stock/bond options. Index funds are great to get started but if you prefer individual stock investing, you’ll need to spend the time doing your research. Here are some resources I’ve found helpful:

 

  • Investopedia.com
  • Simply Wall St (app)
  • Morningstar
  • Google finance

 

 

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