I was recently asked in my private Wealth Building For Powerful Women group: “How can I overcome the fear of investing?”
And because it’s such a common block for many people, especially after experiencing huge “paper losses” in the recent markets’ swing to bear territory, I feel that this topic deserves a closer look.
By the way, I suggest that you also check out the 3 Common Misconceptions about Investing.
Tip #1: Get Solid Knowledge About Strategic Investing
It’s natural for us to feel fearful about doing something we don’t understand well or don’t have solid knowledge about.
Remember your math or science classes at school? The subjects seemed complicated and even scary sometimes…until you learned and understood them.
Even driving a car at first, when you were just getting started, felt like a complex skill, right? And now you can drive it with your eyes closed… well, almost. LOL
The exact same approach applies to becoming knowledgeable about investing – the more you learn and practice, the more competent, confident, and discerning you become about making financial decisions.
In addition to learning about different investment strategies, different financial instruments available to you, and various ways to manage investment risk, you can also learn how to deal with market cycles, how to plan for retirement, and how to create a solid investment portfolio that will carry you over market downturns and economic recessions.
You can read books (e.g., Tony Robbins: “Money” and “Unshakable”, or Millen Livis: A Shift Toward Abundance: Pathway to Financial Freedom) , read financial publications (e.g., Wall Street Journal) and financial articles on the Internet, listen to financial podcasts (e.g., The Investing for Beginners or The Investor’s Podcast), take online or LIVE investment training (e.g. Grow Wealth with Stock Market Investing and Grow Wealth with Real Estate Investing), watch financially-inclined youtube channels (e.g. MillenLivisChannelWealth)
*When it comes to investment training, it’s very important that you trust and connect with the instructor/guide.
Tip #2: Think LONG Term
Think LONG term – don’t worry about “making it happen” and “getting it right” in a short time. All strategic investors have a long view investment horizon.
Having a longer timeframe helps mitigate risks from cyclical financial markets, but it also gives you time to test your strategies, make adjustments, and decrease pressure to hit “home runs” with each investment.
So, don’t judge your investment portfolio’s performance after just a month… or even a year.
Investment portfolios can sometimes take a decade or two to produce that long-term 9% + returns. Be patient and let your portfolio grow into its full potential.
Tip #3: Start Small
Allow yourself to screw up at the beginning. That’s normal with just about anything, right? That’s how we learn.
So start small, give yourself room to learn through experience. You can even start by using “paper-trading” options that some brokerage companies offer….
Also, decide how much you can stand to lose (it’s called “risk tolerance”). You can use “trailing stops” to control your losses.
What I like about stock investing is that it doesn’t require large sums of money upfront (if you’re planning to invest on your own instead of hiring an investment advisor to manage your money, which usually requires a large minimum – from $250K to $500K).
There are a number of micro-investing services out there on the Internet that can help you get started investing when you don’t have a lot of cash to allocate. Do some research and read users’ reviews before opening an account.
Tip #4: Adjust and Refine
We learn the most from our mistakes. If what you were doing at first isn’t working out – PAUSE. You can always adjust and refine your strategies as you learn and become more experienced.
It’s totally OK to change your strategies if you realize you made a mistake. The worst mistakes are made when we panic.
When you make up an investment portfolio, you want to take into account the amount of money you have to invest, your investment goals and timeframes, and your risk tolerance.
Your investment portfolio needs to have an adequate asset allocation that takes all of these factors into account.
Always think about striking a balance between GROWING your money and PROTECTING it at the same time.
And if your financial situation or needs change, you can always adjust your portfolio’s asset allocation. So, there’s no need to be frightened about making a mistake – you can always course-correct.
Tip #5: Keep a Bigger Perspective
Let’s say you lose money on some of your investments.
First of all, if you do your research and know what you’re doing, you can NEVER lose 100% of your invested money.
Secondly, you’re not going to jump into financial markets with ALL your investable funds, right? And so, since you’re not investing the cash you need to survive tomorrow or next month, it’s OK to allow some “paper losses” while markets go through temporary corrections.
If you don’t panic and don’t sell when everybody panics, your paper losses can recover…
When you’re investing for long-term goals, you don’t need that money for a decade or more. And in the long run, the markets tend to go up.
The Bottom Line
The fear of investing is not easy to overcome. It is especially hard if you lost a lot of money in the past. Nobody likes losing money…even if it’s just temporary.
So, I understand that making that first leap into the markets may feel hard and scary. But just because it feels hard and scary to you right now doesn’t mean that you should avoid investing altogether.
Think about all those times in your life when you felt scared before you learned how to do it well. Biking, swimming, driving, speaking a foreign language(s)… And once you learned the skills, it became natural for you…
And so, use the 5 tips shared in this article, learn about investing, and practice until investing becomes another natural skill for you.
To Your Health, Wealth, and Freedom!
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