Have you EVER invested your money and had an “investor remorse,” like “hmm, was it a good idea to invest? Maybe I should have waited….”
Or maybe you’ve had some cash in a bank and wanted to invest it YET felt paralyzed by fear of losing your money? Or by fear of making a mistake?
If you EVER felt something like this, I want you to take a deep breath…and know that MANY people experience fear around investing, which keeps them on the sideline for years.
And so, they procrastinate…and, at the same time, feel guilty for not doing enough for their financial future.
They feel FOMO (fear of missing out) because they know they’ve got to use investing to grow wealth. However, they get distracted by other financial priorities or hesitate to enter the markets at the wrong time. And so, they wait and often…waste time and opportunities.
I used to be one of these people. After losing almost all my retirement money during the 2008 market meltdown, I felt terrified… Being recently divorced and jobless was amplifying my fears. I knew very well that investing is the way to grow wealth and become financially independent but…boy losing your retirement money sucks, especially when you’re in your 50s…
It took a major personal breakthrough to get back to investing, and the result speaks for itself…I became financially independent in just seven years.
And so, why so many people avoid investing their money, so it grows and works for them?
Why they easily get distracted by other priorities? Why they don’t take action on what they KNOW needs to be done?
There’re various reasons, of course.
One common reason is our inherent bias for immediate “wants & needs” – we always prioritize immediate needs (like paying for kids’ college, or buying a house or a new car, or going on a family vacation.)
Another common reason for avoiding investing is the fear of losing money, especially after experiencing huge “paper losses” in the recent markets’ swing to bear territory. And so, many people focus more on making money than on growing their wealth.
And yet another reason for not investing is buying into common misconceptions about Investing.
Check out an article How To Invest Your Money where I shared my high-level view on investing.
But today, I want to share the three most common misconceptions about investing by briefly defining what investing is about and what it’s not.
3 Most Common Misconceptions About Investing
1. Investing is NOT about frantically trading stocks – buying and selling every day or every week.
2. Investing is NOT about being glued to multiple screens with stocks’ tickers all day long, monitoring every move on the stock markets.
3. Investing is NOT about getting rich quick – gambling with HOT penny stocks, making risky bets without having a strategic approach to growing your money, and creating lasting wealth.
OK, now let’s talk about what STRATEGIC Investing is (the only investing that creates LASTING Wealth).
1. Strategic Investing IS about steadily growing your assets over time and receiving multiple recurring streams of income.
2. Strategic Investing IS about having a long-term investing horizon and making strategic purchases aligned with your short/medium/long-term financial goals.
3. Strategic Investing IS about knowing how to create a strategic asset allocation in your portfolio so that you grow your wealth steadily and protect it by using risk management techniques.
Now… Strategic investing is not just the Stock Market investing, which is simply one of the investment strategies.
But since the Stock Market is a popular and common form of investing, let’s look at how scary investing in the stock market really is.
On January 1, 2000, the S&P 500 index (one of the representatives of the U.S. market), was 1,425.59.
And despite all kinds of market corrections between 2000 and 2020 – with annual losses anywhere between 9% to 38% of its value (that’s about as bad as it gets) – on May 29, 2020, S&P 500 index was 3,044.31 – over 100% increase in value since 2000!
Over the last 80+ years, the stock market has returned an average of about 7-9% annually. Some years are really bad (that’s what we fear), but on average, the long-term returns are pretty good.
Consider a risk-averse investor buying low-yielding but relatively safe investments like a certificate of deposit (CD) (or short-term bonds) that return about 4% annually. After 30 years of investing $10,000 per year, the safe investor earning 4% will have about $583,000.
Compare these returns with a risk-embracing investor who buys stocks that average 9% per year. After 30 years, the stock investor will have about $1.486 million (more than double).
In this example, the CD/bond investor may get far short of their retirement goals due to being too conservative.
And if you want to take your money out of the stock market and keep it all in cash, I invite you to compare the growth of your cash portfolio, which will be negative over the long term because inflation will erode your purchasing power, against the potential gains in the stock market.
Historically, the stock market has been one of the best bets if you want to grow your wealth over the long term. However, always remember that it’s not wise to invest ALL your money in any one asset!
The Bottom Line
Understanding what is strategic investing will help you stay away from “get-rich-quick” schemes that can be thrown at you by unscrupulous sales folks. Be discerning and know YOUR values and YOUR goals.
And now that we cleared some misconceptions about investing and markets, In the next article, I’ll share with you five tips to overcome the fear of investing so you can start growing your wealth more strategical and mindful manner!
To Your Health, Wealth, and Freedom!
PS: DOWNLOAD your Wealth Planner HERE
https://daretochangelife.com/wealth-planner and start taking simple steps on your road to Personal Freedom and Financial Independence.
Millen is a Wealth architect and Financial Independence Coach, entrepreneur, and a bestselling author. Being a Possibilities' Catalyst, she uses her intuition, business, and investment expertise to support entrepreneurial women (like you) who want to master their money, live their purpose achieve financial prosperity and freedom. With her physics and business education, corporate and entrepreneurial experience, money management know-how, mindfulness practices and transformational coaching skills, Millen has a unique ability to guide and support clients in achieving extraordinary success in their lives.
To Diversify OR NOT to Diversify PART 2: the Danger of Over Diversification and How to Avoid It
Wealth Building Mini-class series: To Diversify or Not Diversify? Part 1: 3 Benefits of Having Diversified Investment Portfolio
Do You Know How To INVEST Your Money?
Essential #4 for Creating Wealth and Success