Changing your lifestyle can be difficult, and many of us are hesitant to take a chance on anything unfamiliar or uncertain. Perhaps you’ve been thinking about investing money, but are afraid of doing it wrong or losing money. Investing is a critical component of your financial health and can help you build wealth and attain financial freedom.
As a first-time investor, we understand that getting started can be intimidating. It’s a whole new world full of what seems like unintelligible jargon, which is why we’ll help you overcome your fear of investing with these five simple, easy-to-follow tips.
1. Start small
The first step in overcoming your fear of investing and getting started is just to do it. It doesn’t have to be much; invest a few euros in stocks, an index fund (a collection of stocks), or even peer-to-peer lending. At Bondora, you can start investing in peer-to-peer lending with as little as 1 euro.
As the saying goes, Rome wasn’t built in a day, and your investment portfolio isn’t something that will appear overnight. Every investor starts somewhere, usually with a small investment that grows over time. But, the one crucial thing that every successful investor has is that they overcame their fear and started somewhere, which is precisely what you want to do.
2. Educate yourself
As humans, we often fear what we don’t understand, so one of the best ways to overcome that fear is by learning. There are countless ways to learn about investing, but here are just a few options you can explore.
Using trading simulators
Stock market simulators allow you to practice trading stocks without risking any money. There are hundreds (if not thousands) of online and mobile stock simulators where you can try your hand at investing. These websites and apps look and feel like the real thing, so you can practice and get comfortable investing before committing any money.
Watch videos and listen to podcasts
Podcasts and YouTube videos are great places to learn more about investing. If you’re on the go, pop in a set of headphones and listen to the advice financial experts have to share about investing. If you’re looking for suggestions, check out The Financial Diet or WhiteBoard Finance on YouTube or Mad Money and The Rich Dad Show on Apple Podcasts. Keep in mind that these are just a couple of ideas and that plenty of videos and podcasts can help you learn about investing in various assets.
Read books
Reading is a great way to learn about investing from the pros. If you’re unsure where to begin, check out our top 3 recommended financial books for all investors. The wonderful thing about books is that you can bring them anywhere and work through them at your own pace. Some great books to help get you started include The Intelligent Investor by Benjamin Graham, I Will Teach You to Be Rich by Ramit Sethi, A Beginner’s Guide to the Stock Market by Matthew Kratter, and The Bogleheads’ Guide to Investing by Mel Lindauer, Michael LeBoeuf, and Taylor Larimore.
3. Understand your goals
Some investors don’t take the time to understand their goals before investing. Goals are essential for any investor just getting started because they can help keep you motivated and on track. Sure, you might be afraid of making a mistake or losing money, but what would happen if you were successful and reached your goal even sooner than you expected? Maybe you want to retire early or invest to save up enough money for a down payment on a house? Think about what you want to save up for, how much money you need to get there, and when you can expect to achieve your goal.
4. Invest a little each week
Thinking about investing 5,000 euros right now is a daunting idea. But what about investing 100 euros today and another 100 euros at this same time next week? If you invest 100 euros each week for a year, you will have invested over 5,000 euros by the end of the year. That doesn’t even account for possible returns you’ve earned or the probable increase in investment value.
Another benefit to investing a little each week is that you can take advantage of a common investing strategy known as dollar-cost averaging. Dollar-cost averaging helps you avoid trying to time the market—a mistake many people make. The best thing you can do is start investing today, and Dollar-cost averaging can eliminate the fear associated with buying stocks when they’re most expensive. Even if you buy at the top of the market, Dollar-cost averaging will balance your investment portfolio, since you’ll also be buying when stocks are trading at discounted prices.
5. Use a financial advisor
If you don’t have any interest in learning to invest or don’t want to commit the time to educate yourself, you can always consult a financial advisor to help make the decisions for you. A financial advisor’s job is to understand investing and make money for you. With a financial advisor, you can focus on your job and earning money, knowing that whatever you set aside to invest will be in capable hands. Suppose you like the idea of a financial advisor, but don’t like the cost of hiring a professional. In that case, digital or bot advisors can automatically make investments on your behalf, using computer algorithms and your level of risk tolerance to buy and sell stocks and bonds.
It’s natural to have a fear of investing, but fortunately, you have some great options to help you start slow and small, manage risk, and build your investment portfolio over time. When you’re new to investing, it might seem like you’re taking a huge leap into the unknown, but once you jump, you’ll realize that the fear itself is the scariest part of all.