I don’t come from the type of family that follows the stock market, watches CNBC, or reads the Wall Street Journal. We’re more “work a steady job and open a 401(k)” kind of people.
Lots of people like us miss out on financial opportunities because of this impression of ourselves as just not the investing type. But with investing becoming easier and more accessible by the minute thanks to ever-improving technology, we’re basically all the investing type now.
So, next time you catch yourself uttering any of these common excuses for not investing, think again! You may just be able to overcome it and get comfortable playing the game.
What’s Ahead:
1. “I don’t know anything about investing”
Investing seems complicated.
In some ways, that perception holds true. Investing products — the places you can put your money, like stocks, bonds, funds, or annuities — are indeed complicated. Where your money actually goes is unclear, and fees are built-in in sneaky ways.
So-called financial advisors are more like financial product sales reps once they’ve got you on the hook by convincing you you can’t do any of this without them.
Plus, if you’ve ever encountered a news headline about the stock market — which is basically every day, all the time — you’re sure to be convinced you have to know way more about whoever Dow Jones is and what a NASDAQ does.
The truth is, you’re better equipped to invest than you think.
How to overcome this excuse
If you’re afraid you don’t even know where to begin, start with the simplest things.
Start with a retirement account
A retirement account, like a 401(k) (with an employer) or an IRA (without one), is pretty much the simplest place to start. These accounts come with tax advantages, and they don’t require you to choose what to invest in (though you could have the option if you prefer that).
Take a step further by opening taxable investment accounts
You can take your money a step further by investing in taxable investment accounts. Start with uncomplicated products like index funds and exchange-traded funds (ETFs) — products that basically spread your money across lots of stocks to create a balance between risk and gains.
Meet with trusted experts for guidance
If you want guidance, connect with a financial planner in your area. A Certified Financial Planner (CFP) must adhere to a “fiduciary standard of conduct,” which means they have to make recommendations in your best interest.
Avoid working with a broker, a type of financial professional who buys and sells securities for you and sells investment products on commission, if you don’t have very much investing knowledge yourself. They’re not bound by a fiduciary duty, so they could lead you into investments that aren’t right for you.
2. “Investing is for rich people”
It used to be true that you needed to have a hefty chunk of disposable money, plus the ability to hire a “wealth manager,” to get started in the stock market.
That’s because financial planners and advisors tend to make more money when they work with clients who have more money. They’re usually paid a fee based on assets under management (AUM) — i.e. how much money your account with them is worth. Hence high-dollar minimum investments to get started with many traditional firms.
Luckily, those firms aren’t the only players in this game anymore.
How to overcome this excuse
Literally, anyone can get started investing through an online brokerage (a.k.a. robo-advisor) or an investment app — especially what’s known as micro-investing apps.
Micro-investing apps, including Acorns and Stash, let you start investing with as little as a few dollars for a monthly fee, which is not based on AUM. So, they don’t restrict who they’ll work with based on how much money you have.
The best part about apps like this is that they usually let you buy fractional shares, pieces of stocks, rather than a full share of a stock. That gives you access to back major companies, like Tesla, without shelling out $600 for a single full share.
3. “It’s not the right time”
Thinking you’ll start investing later? Maybe in 5 or 10 years? Or when those headlines about stock market volatility chill out a little?
You’re not alone. That mindset keeps tons of people from starting or achieving a lot of things, like moving to a new city, having kids, starting a relationship, looking for a new job, and more.
If you wait for the right time for everything, you’ll never cross anything off your list.
How to overcome this excuse
You need to know this about investing: the right time to start is yesterday.
Investments benefit from long-term growth, both because of the generally rising value of assets and because of compounding interest — i.e. earning interest on interest year after year.
When you’re investing for long-term savings like retirement or college savings, the earlier you start the better. Compound interest will stretch every dollar further, so you don’t have to put as big a strain on your day-to-day finances to end up with the same amount.
And a longer horizon — i.e. time before you need to access the money — gives you a better chance of weathering the inevitable ebbs and flows of the market.
Don’t believe me? Use MU30’s Compound Interest Calculator below to get find out how much you could earn:
4. “I don’t want to lose money”
Yeah. No one wants to lose money. Even frequent gamblers ultimately hold onto the unlikely objective of boosting their bottom line.
Stories of people losing it all in the stock market are scary and you can find them without looking too hard. Before you let them dictate your own fear, look into the details. Many people fall victim to poor choices more often than some inevitable bad luck in the market.
Investing comes with risk. No one should deny that, and you shouldn’t listen to anyone who does. But you can cultivate a positive investing mindset that helps you make wise choices with your money and avoid common investment pitfalls.
How to overcome this excuse
Cultivating a positive mindset for investing means understanding your goals and avoiding emotional decisions. These simple adjustments can go a long way in keeping your finances on track.
It’s easy to make poor choices if you’re looking for advice in the wrong places — like news headlines or stock advice for advanced investors. What those sources tend to forget to mention is that most investors, like you, me, and my non-investor family, can set contributions on autopilot and sit back to let our portfolios do their thing over time.
And that thing they’ll do? It’s probably going to be to grow.
In the long term, investments are likely to grow in value — even with disruptions like a recession.
5. “Um, remember 2008?”
The market is unpredictable. That’s what they say. That’s how it feels when your retirement account takes a huge hit because of a nationwide housing crisis or a global virus outbreak.
If you’ve got a short memory or you’re young enough that you only started paying attention to economic trends when they hit bottom during the Great Recession, investing could seem scary. What if that happens again and you lose everything?
How to overcome this excuse
Remind yourself to think long-term. That macro view makes the market a lot more predictable than it seems in any moment of fluctuation.
Even with the massive drop during the Great Recession, the stock market has grown phenomenally over the past 30 years. Every financial professional will also point out that it’s trended up steadily since the Great Depression.
If you plan to retire in the next three to five years, you’ll want to talk with a financial planner about the best moves to protect your money from potential market volatility. Otherwise, the data shows you don’t have to worry much about those dips.
6. “Corporations are evil”
Not wanting to support something you believe is evil is actually a great excuse for not doing something, including investing.
You might want to avoid using your money to back companies with poor records on human rights, environmental responsibility, working conditions, and unsustainable fiscal activities. When you stick your money into a fund or, even more obscure, a retirement account, you might not know which companies or types of assets it’s actually supporting.
Many financial firms and advisors are working to address that.
How to overcome this excuse
Work with a financial advisor or an investment app to prioritize socially responsible investing (SRI) and/or investing in ESG funds, which are funds whose assets are screened for their environmental, social, and governmental impact.
Fund managers create ESG funds looking at details like energy efficiency, racial and gender equity in leadership, and the production of products like tobacco or weapons.
Tell your advisor what matters to you, and they can help you invest in funds that align with your values. Or use a robo-advisor dedicated to socially responsible investing, like Ellevest.
7. “I’m not good with numbers”
This is a common excuse for ignoring every important part of your finances, but it’s not a good one.
I know: investing is chock-full of numbers. You’re contributing 3% and getting a 1.5% match and paying a 0.5% fee, and you earned $3,500 in dividends last quarter, and the Dow closed at 35,000 last night…
You might think you’re inherently ill-equipped to be an investor because you don’t have the mathematical chops to keep an eye on your investments and move money around responsibly.
Good news: you don’t have to mess with the numbers at all!
How to overcome this excuse
As an investor, it’s not your job to be good with numbers. If you’re investing big money, that’s your financial planner’s job. If you’re just dipping your toe in, an app will take care of that for you.
In both cases, you generally have to let them know up front whether you want to create a portfolio that’s aggressive and risky — going for big gains with a higher chance of losses — or conservative — going for small gains with a lower chance of losses. And you’ll decide how much you want to invest, usually a set amount periodically, like $5 per day or $1,000 per month.
After that, they take care of knowing the right places to put your money so you don’t have to think about numbers.
The one number you’ll want to keep an eye on is your fee. If you’re paying a monthly fee to an app, how does it compare to what you’re earning through your portfolio? Is it worth it to you? If you’re paying for AUM with an advisor or planner, how much does the fee come out to each month or quarter? As your assets grow, is the fee still worth it to you?
Summary
Investing has been set up to look scary. It’s not your fault if you’re intimidated by the whole thing.
For ages, it’s been restricted to an elite — and wealthy — few by design: complicated products that required intermediaries to manage, high account minimums, and soaring stock prices. But those days are gone, and investing is way more accessible than it’s ever been.
Set aside excuses based on what you think you know about investing. Get to know the new world of financial technology, and start investing — yesterday.
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