There’s Always a Reason Not To Invest

Photo courtesy of DieselDemon

Investing is a tricky subject.

On the one hand, it’s one of the best tools you have to help you reach your long-term goals.

On the other hand, it’s a subject that’s packed to the brim with bad advice and emotional hang-ups. In fact, the hardest part about investing is not learning how to do it well (which is actually pretty simple), but learning how to control your emotions around it.

And at the very top of that list is the fear of getting started. There are an almost infinite number of reasons that you can have for not getting started with investing, and almost all of them come down to some kind of fear.

Those fears are normal. We all have them. But they’re standing in the way of a better future.

So let’s talk about some of those fears, and why you should ignore them and start investing anyways.

I don’t know how to do it

“Investing is confusing and I’m worried about making a mistake.”

Investing can definitely be confusing. I’ll give you that one for sure.

But the good news is that when you’re starting out, your mistakes actually don’t matter all that much. In fact, for the first few years your contributions will matter much more than your returns. Which means that your focus should really be on making those contributions and simply learning as you go. If you make some mistakes, no big deal. You’ll learn quicker and you’ll be much better off than if you wait to make them later.

“Okay, that’s all well and good, but honestly it still seems too hard. How am I supposed to know what stocks to pick? Learning about that kind of thing just doesn’t interest me and I definitely don’t have the time to figure it out.”

Ready for some more good news? You actually shouldn’t worry about trying to pick stocks because even the professionals can’t do it well. Just don’t worry about it. It’s not worth your time.

So what should you do? Read up on index investing, which is not only easy to do but gives you a better chance for success. You don’t have to have an MBA or love pouring over financial reports to be good at investing. You can get great results with just a few hours of effort every year.

I don’t have the money

“I just don’t have enough money right now to invest. Maybe someday…”

This one has a few sides to it. Let’s look at each one on its own.

Investing is only for rich people – Not true. Do you have any long-term financial goals? Investing is a great way to reach them quicker, no matter how much money you have today. Here are some tips on how to get started, even if you don’t have a lot of money: How to Start Investing from Scratch.

I need to pay off my debt first – Maybe true. Maybe not. If you have credit card debt, then I would definitely agree that the debt should take priority. But if you’re talking student loan or mortgage debt? It depends. If having the debt really bothers you, then by all means make the effort to pay it off early. But at least think about a balanced approach where some of your extra money goes towards debt and some goes towards investing. That way you can get the best of both worlds.

I don’t have room in my budget – Some people legitimately aren’t making enough money yet to cover their necessary bills and still have something left over to invest. If that’s you then I would agree that investing isn’t the right move yet. Instead I would focus on finding ways to earn more money.

But before you jump to that conclusion, I would take a second look at your spending patterns and see if there are any simple things you could do to free up some room. Could you negotiate some bills? What about switching to a lower cost cell phone plan? Or could you look at something bigger like moving to a less expensive house? Sometimes it comes down to clearly defining which things are truly important to you and which things aren’t, and making the tough decisions to get rid of the things that aren’t.

The market is too scary right now

“Have you seen the stock market recently? It just keeps dropping! I’m going to wait until things settle down.”

It can be pretty scary to invest when the stock market is in the middle of one of its big drops. Just ask anyone who was around in 2008 and they can tell you just how scary it felt at the time.

But let me ask you this: what’s happened since that huge market crash? If we start from 1/1/2008, which was actually BEFORE the crash happened, and look through 7/17/2014 (the day I’m writing this), the stock market has returned 7.2% per year. And remember, that includes the big crash that freaked everyone out so much.

Here’s some more proof that short-term market drops don’t predict anything about the future: The Stock Market is Falling! In Other News, Grass is Green.

Every now and then the stock market has a big drop. It’s just part of the deal. But it doesn’t mean that the entire system is broken and it isn’t a reason not to get started. You might even be able to get some really good deals.

The market is too good right now

“I just saw on the news that the stock market reached record highs. That means it has nowhere to go but down, right? What if I invest now and it immediately tanks? I don’t want to lose all my money.”

This is the opposite fear as the one right above, and it can be just as scary. But there are two big reasons why market highs shouldn’t stop you from getting started.

First, same as above, we have no idea what the market is about to do. The latest market high might mean we’re headed for a drop, but it might also mean we’re simply on our way to even bigger highs. Being unsure about what’s going to happen next simply can’t be a reason not to get started, since there’s never going to be a way to be sure.

Second, if you’re worried about investing everything and immediately losing at all, well, you simply don’t have to invest everything all at once. You have two big options for taking a more cautious approach:

• Dollar cost average – Rather than putting all of the money you want to invest in all at once, do it over time with small, regular contributions.
• Go 50/50 – Investing doesn’t have to mean putting 100% of your money into the stock market. You could put some into the stock market, and some into a more conservative investment like bonds. That way if something bad did happen in the stock market, you would have some of your money that wasn’t affected.

The bottom line: don’t let whatever the stock market is doing right now affect your decision to get started. But also don’t feel like you have to dive in head first. It’s perfectly reasonable to start cautiously and work your way up as you go.

It’s too risky

“I can’t handle the big swings of the stock market. It makes me too nervous.”

You know what? It’s AWESOME that you can admit this now instead of when the market is actually tanking. A huge part of investing is understanding how much risk you’re willing to take on, so good for you for knowing that you’re a little bit scared by the ups and downs of the stock market.

The good news is that you don’t have to put 100% of your money into the stock market. My own personal investment plan only has 70% of our money in the stock market, and you could easily choose to go higher or lower than that.

One of the strategies I like is the Flight Path approach to investing, which says that you should start more conservatively and increase your investment in the stock market over time, as long as you’re comfortable with it. This will help you figure out just how much risk you’re willing to take on before you take on too much of it.

Investing is like gambling

“Investing feels way too much like gambling to me. How am I supposed to know when the stock market is going to go up and when it’s going to go down? I’d rather just keep my money where I know it’s safe.”

I agree. Investing IS like gambling. But maybe not exactly in the way you’re thinking.

If you’re trying beat the market by picking stocks or predicting the market ups and downs, then yes, investing is a lot like gambling. You might get lucky, but more often than not you’ll probably walk away a little poorer than you were before.

But if you make a plan based on time-tested principles, then it’s more like being the casino. You’re technically still gambling, but this time the odds are in your favor. Will you win every time? Nope. Sometimes you’ll have to suffer some pretty big losses. But if you stick to your plan, the odds are high that you’ll win over the long term.

Investing IS like gambling. It’s just that if you do it right, the odds are in your favor.

Forget the reasons. Just start.

Just as with anything else in your life that feels big and important, there are always going to be reasons not to get started. It’s normal to feel a little scared about trying something new, especially when it involves putting some of your hard-earned money at risk.

But investing is one of the best tools you have to help you reach your financial goals, and the sooner you get started the sooner you can build your family’s financial security and start working towards the things that really excite you.