10 Investing ‘Excuses’...
1: ‘I don’t see the point of investing in the first place’
Any decision you make with your money, even not investing, is an investment decision involving risk and rewards. You’re focused on the risks involved in investing. But what are you risking by not investing?
You’re risking today’s money having less value in the future because of inflation. You’re missing out on the magic of compounding. Assuming an average 10%pa return, money invested in the stock market doubles every seven years.
You’re forgetting that diversification (spreading your investments across many companies) is a powerful way to reduce risk.
When it comes to personal goals, everything has a trade-off. Most people don’t have enough money saved to be able to live adequately in retirement without earning some kind of investment return. In the simplest terms, by not investing, you risk outliving your money.
2: ‘I’m too late. The train has left the station’.
It’s natural to feel regret about decisions you’re unsure about. But it’s never too late to invest. Every day, we expect the stock market to go up. Otherwise, investors would find other things to do with their money.
3: ‘When it comes to investment advice, I don’t know who to trust’.
Here’s the good news: You don’t have to ‘trust’ anyone, not even me!. Just trust the market. No human being can tell you more than the market has already told you through setting prices.
Markets are always reacting to new information in real time. Anything you hear a pundit say on TV or read on an internet message board is yesterday’s news.
It may seem obvious, but you have to remember that there’s a difference between fact and opinion. Cultivate a healthy sense of scepticism when it comes to financial punditry, and remember that it’s not news, but entertainment.
4. ‘It’s not the right time to invest’
Human beings have a natural urge to transact. But getting into and out of the market is gambling, not investing.
If you treat the market like a casino, and you’re picking stocks or attempting to time the market, you need to be right twice, in an attempt to buy low and sell high.
Fortunately, you don’t need to time the market to have a good investment experience. It’s unlikely a person can pick the right stock at the right time, especially more than once.
Once you decide to be a long-term investor, the timing debate is off the table. And that’s a big relief. When you buy the whole market, you’re investing in human ingenuity to find productive solutions to the world’s problems.
5: ‘I’m worried I’ll lose it all’
If you’re lucky enough to live a long time, you’ll face big market downturns. You’re much more likely to ‘lose it all’ with concentrated investments than you are with a well-diversified portfolio.
Individual investments may go to zero, but the modern-day market has been around for almost a century, has an average annual return of 10%pa, and has never lost more than 43% in a year.
6: I don’t know what I don’t know, and that makes me nervous’
It’s OK to be nervous! If investing were a slam dunk, there wouldn’t be a positive expected payoff.
For an investment to offer the possibility of a return, it needs to carry risk and when it comes to deciding how to grow your hard-earned money, the stakes are high.
Uncertainty is scary, but without uncertainty, there’d be no opportunity. Stock market behaviour is uncertain, just like most things in our lives.
None of us can make uncertainty disappear but dealing thoughtfully with uncertainty can make a huge difference in investment returns and quality of life. Your challenge is to stick to an established plan.
7: ‘I only want to invest in companies I’m familiar with’
Stock markets contain all the publicly traded companies out there. Every company has an incentive to do better. Investing in human potential across a broad range of companies is more likely to pay off than trying to predict which individual company is going to perform best. You can do well without having to outguess the market.
8: ‘I’m afraid there’s going to be another financial crisis’
History shows us there’s always going to be another financial crisis, followed by another recovery. Every crisis has a different cause, so it feels different every time, but the market has always delivered a positive return once things settle down. Crises, by definition, are not predictable. Markets are forward-looking and remind us of the power of human resilience.
9: ‘I’m overwhelmed. It’s just too much to think about’
Inertia is a powerful force. Thinking a little bit about it right now means worrying a lot less in the future. Inaction comes with a price though. I’ve seen people worry more about NOT making a decision than actually making one!
10: ‘I don’t have enough money to invest’
When it comes to investing for the future, there’s no minimum. The first and most important step toward investing is saving.
It’s human nature to procrastinate. Half the battle is just getting started. This can mean ‘paying yourself first’ by directing a small percentage of your income into savings.
Putting money aside regularly becomes a feel-good habit, like exercise. You can witness your own incremental progress and the boost in self-esteem it brings.
You’ll be surprised by how easy it is to set this in motion, and you’ll feel good — for yourself, and your family.
So, There It Is
I wonder if any of these resonate with you? there’s nothing wrong with feeling uneasy about investing. It’s a dark art for some people and a world that seems safer to stay away from.
I suppose I’m bound to say this but even a half-decent financial adviser should be able to make the process much easier for you. To guide you and to support you.
Happy investing!...