Unless you were raised by personal finance ninjas, the thought of investing your hard-earned money can be a scary thought. Constant predictions of market crashes and mysterious bubbles bursting doesn’t help either. My wife and I kept 99% of our money in cash and very little of it was invested in our retirement accounts, let alone other asset classes. Luckily, we worked to overcome our fear of investing.
Now, we invest the majority of our money and leave just enough cash for emergencies.
Getting comfortable with investing so much of our money did not happen overnight. It first started by educating ourselves, setting a financial plan that aligned with our goals, taking baby steps, tracking our progress and adjusting along the way.
Step 1: Educate Yourself
The greatest barrier to overcome to our fear of investing was the thought of screwing up and losing a lot of money. The only way to ease this fear was to learn as much as we could. We are lucky to live in an age where almost everything we need to know is already plastered over the internet and within libraries.
Start with becoming familiar with different asset classes and the risks they carry. As you begin laying the foundational knowledge for smart investing. In doing so, you will learn how to mitigate those risks and avoid making expensive mistakes.
One of the first and favorite books that got us started was The Simple Path To Wealth by Jim Collins.
Step 2: Dive-in
In your research, you will also learn about different investment vehicles, investment strategies, and tax optimization techniques. You find yourself better capable of maximizing your returns and you will be more confident about your choices. Thus, helping you overcome your fear of investing.
It is easy to get caught up in the whole paralysis by analysis phenomenon. If we had read everything we now know about investing before we even started, we would still be broke.
If you want to dive in and don’t have much money, start with a trading platform without fees and with the ability for partial share purchasing. Meaning you can own a part of Amazon or your favorite publicly-traded company for just $1.00.
One of my favorite no-fee investment apps is M1 Finance. Not only does it allow you to buy partial shares of various stocks and funds, but it also allows you to create your own index and fund them proportionally with each contribution. It also allows automatic deposits to your investment account which will eventually lead to larger growth with a long-term buy and hold strategy.
Step 3: Track Your Progress
Tracking your investments can be a double-edged sword. I believe you need to monitor your investments at least once per year and no more than once per month. Sometimes checking your numbers too often can lead to making emotional decisions you will regret. You need to make sure you stick to your investment strategy and investment philosophies.
My favorite way of tracking my investments is by using Personal Capital. It essentially syncs the information from all the financial institutes you link. It is completely secure and allows me to monitor all my accounts each month without having to physically log-in to each account. Plus it allows you to track your net worth, cash flow, budget, asset allocation, plan retirement, and gives you great visuals of it all.
If you use this link, you will get a $20.00 Amazon gift card once you sync an investment account. Check out Personal Capital at no cost to you!
Related: Investing Credit Card Rewards
Step 4: Forgive Yourself and Propel Forward
We have all made poor financial choices in the past, but it does not mean that we’re inherently bad with money. It just means that we’re human. We’re capable of learning from our mistakes and making better choices.
Choosing to spend less than you earn and invest the difference is a wise choice that your future self will thank. Time to overcome your fear of investing because the benefit far outweighs the risk.
As Warren Buffett says:
“If you don’t find a way to make money while you sleep, you will work until you die.”
– Warren Buffett
