Do you have investophobia? Here are 3 steps to overcome it 💸

Financial Well-being

Investing. The word alone may give you goosebumps.

Some people never invested because they lack knowledge of the markets and available options. Others simply don’t want to risk their money. But some have a real fear of investing. Can we call it investophobia? (Yes, let’s call it investophobia.)

Fear comes in many shapes and forms.
Fear comes in many shapes and forms.

What is fear anyway?

Fear is nothing more than being afraid of the unpredicted outcomes that may happen. It’s not knowing how something works and what the consequences are of these unknown things.

Fear is a survival mechanism, but there are ways to deal with it and overcome it.
Fear is a survival mechanism, but there are ways to deal with it and overcome it.

If fear is associated with a lack of understanding or knowledge, is it possible to overcome fear by studying?

1. Education, information, and knowledge

Yes, indeed, you can. You don’t need to fight fear. You can let it come, understand it, and then take action: Educating yourself on any matter and accumulating information is tackling fear like players tackle each other on American football or rugby (Haven’t seen it? They basically head straight forward and attack head-on). And that’s precisely how you should face your investophobia.

There’s a probability that fear will go away or become manageable if you become well informed about the investments you want to make, and especially about the risks involved.

Can I lose all my invested money?

Will I be able to cash out at any time?

Answers to these questions vary widely by investment option and platform, but knowing the answers will bring you peace of mind and slowly eliminate that accrued fear of trusting your money elsewhere.

Knowing all the worst-case scenarios and understanding how likely they are to happen is key to overcoming a fear of investing.

2. Testing the waters

Another method of tackling your fear is to start investing.

It may sound counterintuitive, but if you start with a small amount that you’re willing to lose, then you can test the waters and discover and overcome your fear by seeing what it’s like to invest.

Some platforms allow you to start with a very low amount. With Bondora’s Go & Grow, for example, you can start investing with as little as €1. This makes it easier for you to start investing, to get your feet wet, and to test the waters until you feel ready to cannonball into the deeper end of the pool.

By starting small, you can overcome your fear by taking baby steps.
By starting small, you can overcome your fear by taking baby steps.

Investing only €1 is enough for you to get accustomed to the process of putting your money somewhere, but little enough to not freak you out if you lose it. By seeing it grow or lose value and following the market, you’ll enable yourself to grasp better how it works.

Psychology Today writes that: “Habituation, defined formally, refers to the fact that nervous system arousal decreases on repeated exposure to the same stimulus.” In other words, when a situation goes from new to familiar, your brain gets bored and produces fewer reactions, making you comfortable in a previously uncomfortable scenario. It essentially turns your uncomfortable zone into your comfort zone. Yay!

When this happens, it’s easy to get confidence and to start raising the amounts, investing more, and ultimately creating and following an investment plan.

3. Clichés help!

Some essential investment tips can also help. These are things you hear all the time from your friends and read it everywhere on the internet, from social accounts to blogs. They may sound cliché, but that’s because they’re tried and tested!

  • Diversify your investments. If you lose some part of your portfolio, the rest still holds up. Diversifying is basically investing in assets from different categories, risk ratings, durations, liquidity and industries, so your overall portfolio risk is lowered.
Don't put all your eggs in the same basket.
Don’t put all your eggs in the same basket.

  • Invest only what you can afford to lose.
  • Understand that making mistakes is normal, including investing, but that doesn’t mean you’ll lose everything and go bankrupt overnight. Huge mistakes may take a bite out of your portfolio, but smaller errors may not be so apocalyptical and can bring valuable learnings into your strategy.
  • Play for the long run as volatility flattens over time.

So, what will you do to overcome your fear of investing? Or, if you know someone with investophobia, what will you do to help them overcome their fear? Share this article with them if they need some useful tips to help dive into the rich pool of investing.