So you want to start investing but all you can think about is “What if I lose all my money?”.
We all work hard for our money and the thought of losing it in an instant can be painful.
Rest assured, as I’m going to give you 7 simple steps to help you overcome your fear of investing and help you take the leap.
Educate Yourself
Before taking the dive and putting your first bit of money into an investment, educating yourself is a must.
Reading articles, books and deep diving into the world of investing will give you the foundation you need before you start investing.
This will help you avoid mistakes and feel confident about managing your money.
Have A Strategy
Having a proper strategy in place will help streamline your approach to investing and stop your emotions from playing with your decisions.
Your age, risk tolerance, amount and end goals are all key factors in making your strategy.
Once you have the answers you’ll be able to make a strategy that is personal to you.
Set Goals
Knowing your investment goals will help you tailor your investment strategy.
You should ask yourself what your goals are. Are you planning to invest for retirement? Your child’s education? Generate an income maybe?
All these matter because it will help you pick certain investments that cater for each goal.
This will help with the fear of investing as you’re not aimlessly investing, you have a clear goal and from that, you can pick a strategy.
Start Small And Then Increase
Nobody is happy to lose money, but starting with a small amount will give you skin in the game.
This is where the real learning starts as you can test yourself to see how you react to having real money invested.
Over time, once you begin to feel comfortable, you can increase the amount you invest.
Don’t Let Volatility Scare You
When your money goes up and down it can be hard to keep your emotions in check. You’ll want to withdraw your money and run for the hills.
You need to get used to volatility. This is the way the stock market reacts to economic news such as bank interest rate changes, wars, inflation etc.
The sooner you keep this in mind and have the understanding that it’s part of being an investor, the more relaxed you’ll be about seeing peaks and troughs.
Think Long-Term
When investing in the stock market you must think long-term. Investing isn’t a get-rich-quick game.
Seeing gains on your investments will take time, I’m talking years here.
Luckily for us, we have a secret weapon… Compounding, it’s every investor’s best friend.
Think of a snowball rolling down a hill, as it rolls it gets bigger and bigger, this can be your investment pot if you continually reinvest your dividends and interest.
For compounding to fully work you’ll need to leave your investments for the long term (5-10 years)
So, be in it for the long game, sit back and enjoy the ride.
For a better understanding on investing for the long term, check out this article on why long term investing beats short term speculation.
Check your investments, but don’t become obsessed.
This can be tricky to begin with, you’ll want to check your investments daily. If truth be told though, not much is going to happen day to day.
Checking in weekly at the very most would be advisable.
Pay attention, but don’t get obsessed. This can lead to you getting impatient or overreacting when there is volatility. You don’t want either of these.
Periodically check in to see how things are going, then let time do its work.
I you’re looking for some ways to make extra money to put towards your investments then check out this post on how to make an extra £1000 a month.
Key Takeaways
- Knowledge is power, take the time to learn the investing basics and how economics play their role on market fluctuations.
- Be clear on your goals. What are you investing for? Retirement, child’s education? Once realized, you can develop a strategy.
- Have a long term mindset and become ok with volatility. It takes time to see gains and seeing your investments fluctuate is normal.
- Invest a small amount first, this will help you have skin in the game and build confidence.
- Pay attention, but don’t get obsessed. Not much will change day to day. Check your investments bi-weekly or monthly.
Final Thoughts On How To Overcome The Fear Of Investing
Well, I hope these 7 steps have put your mind at ease so you can overcome the fear of investing.
Remember, every successful investor starts as a beginner.
By following these steps and staying committed you can gradually conquer your fear of investing and start work towards building a more secure financial future.
FAQ’s
How do I gain confidence in Investing?
The best way to gain confidence is to first educate yourself and then actually start investing. Standing on the sidelines will only make it more fearful and keep you from investing. We learn by doing and over time you will gain confidence. It is not as scary as it seems.
Why do most people fail at investing?
The most common reason why people fail at investing is they jump straight in without educating themselves first. They invest in high-risk stocks that are extremely volatile and can lose money quickly.
By following the steps above you will have a solid foundation. You’ll be able to pick an investment strategy that suits your risk tolerance, age and the amount you’re willing to invest.
How do I overcome the fear of losing money?
Losing money has been forever associated with investing… but the negative associations will always stick in people’s minds over the positive, this is human nature.
Money is personal and we all work hard for it, for you to lose it would be a painful experience.
This is why checking the historical data and educating yourself is so important. It can put your mind at rest.
Investing with a small amount first would be the best step, then you can get comfortable with the process of investing without feeling overwhelmed.
What is the biggest investing mistake?
Investing all of your money into one highly volatile stock is up there with the biggest investment mistakes.
Another would be to confuse investing with trading. Trading is highly risky and you lose money in an instant if you don’t know what you’re doing.
