How I got over my fear of investing by learning investing basics, living with uncertainty, and embracing volatility.
Among the regrets I’ve had in my adult life—parting with my beloved Pez collection, never playing hooky, neglecting to floss—one that tops the list is not learning investing basics and getting knee-deep in investing as much as I could. And while I could chalk it up to simply being “young and dumb,” it was really in large part due to all the fears and reservations I had about the “I” word.
As a self-proclaimed money nerd, the other parts of personal finance—being frugal, creating a savings system, paying yourself first—all lay within the warm, fuzzy realm of safety.
But investing? The volatility of the stock market makes it the scary beast of personal finance.
Here are some of the fears I had about investing, and how I managed to overcome them for the most part:
Not Knowing Enough
Unless you’re a portfolio manager or work on Wall Street, chances are you’ll feel like you’ll never know enough. There are literally thousands of stocks, bonds, funds, and indexes you can choose from, the market is constantly changing, and so forth. The truth is that if investing were simple, there wouldn’t be people out there making a living doing it, and there wouldn’t be tomes on the topic.
But you definitely don’t need to be a gray-haired advisor to get your feet wet with investing. I got over the knowledge gap by getting my head around investing basics such as asset allocation, diversification, and rebalancing. Next I gathered the courage to chose a method that worked for me at the time and got started.
The key? Start small and start somewhere. You shouldn’t pour everything you have into something you don’t understand, says Kali Hawlk, a fellow financial writer and founder of Going Beyond Wealth. “It’s important you just get started, because time is such a critical factor when it comes to investing success,” says Hawlk, “so much that given enough time, small mistakes you make early on as you learn aren’t likely going to make a difference if you can give your investments 20 or 30 years to grow.”
Not Having Enough Money
I started getting interested in investing back in my mid-20s and I was barely scraping by. My rent took up half my take-home pay, I tried to stick to a paltry budget each month for groceries and personal items, and saved the rest. The first few years after I held a full-time job, I held back from investing because I didn’t feel like I had enough. But after stumbling upon a few articles on how to get started with little money, I committed to investing $100 a month.
In our age of burgeoning financial tech, you can get started with a micro-investing app, recommends my friend Lee Huffman, a travel and lifestyle writer at Bald Thoughts. There’s a handful of apps out there, opening an account takes a mere few minutes, and you may only need five bucks to get started. Some apps can round up your purchases to the next dollar and invest that “loose change”, explains Huffman. You’ll also avoid the large minimum investments that some investment firms require. Plus, it’s money you’ll hardly notice.
Fear of Losing Money
During the height of the Great Recession, like the good little money nerd I was, I was contributing on the regular into my employer’s 401(k). And one day I checked my account to see that my retirement fund had dipped and lost a third of its value. I remember locking the door to my office to have a quiet, mournful moment to myself.
It was a sad day indeed, and if it weren’t for the early withdrawal penalty, I would’ve pulled my funds out of my account. I had to remind myself that investing is a long game, and to keep my emotions in check. Plus, history tells me that markets recover from short term volatility over the long-term. And guess what? My investments have recovered, and then some.
And if you have access to a 401(k), especially one with an employer match, get comfortable studying the options in there, suggests Jim Wang of Wallet Hacks. “You can learn a lot about investing in a relatively small sandbox, where a lot of the intricacies and analysis of investing aren’t present,” says Wang.
You also have two psychological edges by investing in a 401(k), Wang points out. “It’s retirement money” and not “regular money,” so you don’t feel gains and losses as acutely,” says Wang. “You may also get a match, which is an easy win that gets you ahead from the start.”
Not Embracing Investing
While I am somewhat more confident in investing than I was 10 years ago, my reading list of books and saved online articles continues to grow. I don’t think you can ever know everything there is to know about investing, nor will that feeling of anxiety ever go away completely. And that’s perfectly okay.
I’ve since treated investing like an exploration and experiment, and dabbled in both single stocks, ETFs, and mutual funds. I’ve also taken the time to learn more about the fees and risks involved. For the most part, I’ve stuck to a target date fund, which will reallocate your mix of investments to a more conservative one as your target date nears, plus does the rebalancing for you.
If you want to learn about the stock market without risk, create a fake portfolio and track it until you learn how the market works, suggests Teresa Mears, publisher of Living on the Cheap.
If you’re scared to invest, you’re certainly not alone. But taking baby steps, learning investing basics, and getting started today will help you allay any reservations you have and help your money grow.
Jackie Lam is the creator of Cheapsters, where she helps freelancers get by in the gig economy. She lives in L.A., where she is on the perpetual hunt for the perfect breakfast burrito.
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While Society of Grownups hopes the information is useful, it’s only intended to provide general education. It’s not legal, tax, or investment advice, and may not apply or be useful to your specific financial situation. If you need recommendations geared to your personal financial situation, schedule time with a financial planner.