If you’ve never done any investing before, the prospect can be scary. But I’ll tell you a little secret: Pretty much anything you do for the first time can be a little scary.
Remember the first time you drove a car or started a job? Scary, right? But you got over it. You figured out what to do, asked for help or information when you needed it, and made it through. You got more confident over time. Investing can be the same way.
Making sense of the fear
There’s no doubt about it, investing does carry some real risks. As the sayings go, investments “may lose value”, and “past performance is no guarantee of future results”. So should you go into investing wide-eyed with abject terror? No. But should you be aware of the risks and take steps to avoid them? Definitely. As Steve Maraboli says, “The purpose of fear is to raise your awareness not to stop your progress.”
So learn how to avoid fraud. Get competent advice on the investments you’re considering making, and on how those investments fit with other things you’re doing or planning. And get informed. (The Four Pillars of Investing is an awesome starting place for that.)
Then get your feet wet.
Types of investments
Chances are, you may already be investing without even realizing it. That’s because many people think of an investment as something you can only get on the fast-paced world of Wall Street, where stock prices change faster than you can blink.
But investments can be all kinds of things that you buy with the informed intention of them gaining in value over time, not just stocks, bonds, and high-flying stuff like derivatives. Real estate, mutual funds (which you probably have in your 401k from work), and savings accounts are three examples of more “everyday” investments.
The key there though is “informed intention”. It’s got to be likely to increase in value over time, ideally beating inflation so that you have real returns. If there’s a chance you’ll make your fortune overnight, that’s speculation. (And there’s probably a better chance that you’ll lose your fortune overnight in that case.) The important thing is to make sure you understand the thing you’re putting your money into. Don’t just take someone’s word for it that it’s a good idea or a moneymaker. And run, if anyone ever guarantees you will make money on an investment.
Don’t stress out about the jargon
Speaking of understanding what you’re putting your money into, don’t stress out about the jargon. As with any field, there are special words that experts think are common knowledge, when really they’re not. Don’t let that stuff get to you.
Instead, ask for an explanation in plain English. And keep asking questions and learning until it starts to make sense. If the person you’re asking questions of doesn’t have time to answer them or makes you feel uncomfortable, find someone else.
You don’t have to be perfect
And as with anything, you don’t have to make 100% perfect investment decisions all of the time. No one always makes the right choice, and things can happen that very few people predicted, so don’t expect perfection.
But thinking about your goals, time horizon, and current situation can help you decide what’s right for you, letting you make informed decisions — which are what it’s all about. With good advice and a consistent plan that fits with your emotional makeup, you can start down a path that could be an enormous help toward meeting your money needs in the future. (After all, there are risks to not investing as well.)
So don’t let fear paralyze you. Get comfortable with the idea of investing, and at the very least, make sure you’re sending money from every paycheck to a savings account that you don’t touch in the meantime.Posted in Investing on 06.05.13 with 4 comments.