4 Tips To Overcome Fear When Investing

When it comes to investing, the main reason most people don’t invest is because of fear. They fear losing the money they worked so hard for. I understand this fear when investing. Losing money isn’t fun. However, with a little understanding, I think much of this fear can be overcome.

The question is, just how do you get over your fear when investing? Luckily this is where this post comes in. I’ll walk you through 4 tips to help you overcome your investing fears. The goal is that by the time you are done reading this, you can better put things into perspective and take the first step to begin investing.

And when you begin investing, you can start your journey to financial freedom. Let’s get started.

4 Tips To Help You Overcome Your Fear When Investing

#1. Educate Yourself

When you don’t understand something, it is only natural that you fear it. But as you learn about it, that fear you held slowly fades away.

For example, I have always been scared to fly. But I slowly educated myself on airplanes and how they work. I also look out the window now when we are landing. All of this has helped to ease most of my fear. Yes I am still nervous to fly, but I fly and it’s nowhere near as scary.

The same thing applies to investing. You need to educate yourself about it. You don’t need an advanced degree, just learn the basics. A great place to start is to read A Random Walk Down Wall Street. That will give you a basic understanding of the stock market and will ease some of your fear.

#2. Get Control Of Your Emotions

Taking the education tip above further, you need to get control of your emotions. This is the biggest threat to you investing and being a successful investor. By getting control of your emotions, you are less likely to make a rash decision.

Think back to other times in your life when you made a quick decision based on emotion. Most times you probably made the wrong decision or could have handled things in a better way.

This is true for investing as well. When you make quick decisions, you tend to not make the right ones which cost you money. By taking the time to think through decisions first, you save yourself a lot of headaches and money.

#3. Look Long Term

The third tip to overcome fear when investing is to look long term. You should be investing for 10 or more years. If you need the money sooner than that, you are better off putting that money into a bank account or other guaranteed investment product so you don’t risk losing your money.

But for any long term goal, like retirement, you need to keep your money invested at all times. The reason is because you cannot time the market. You don’t know when it will rise or when it will fall. All you know is that over time, the general trend is positive.

The more you can stay invested in the stock market, the greater success you will have as your money will be able to compound upon itself and grow.

#4. Start Slowly

Now that you are ready to start investing, you have to do so slowly. I know that for many people, doing something quickly is the best option. Think of jumping in a cold pool. It’s worse when you slowly go in. If you jump in, you get over the shock of the cold water much faster.

With investing, the opposite is true. Especially when you fear the stock market. Jumping in too quickly will only scare you and cause you to make things worse.

For this reason, you need to go slow. Don’t invest 100% of your money in stocks. Take a more cautious asset allocation. Try 60% stocks and 40% bonds. This will give you some exposure to stocks and their gains while limiting your losses when the market tanks.

As you continue to educate yourself and learn to keep your emotions in check, you can move to a higher stock allocation if it feels right to you. There is nothing wrong with sticking to this recommended allocation for the long term.

Final Thots

Overcoming your fear when investing in the stock market is important if you want to reach your financial goals. The stock market is an excellent place to grow your wealth. You just have to take the first step and actually start investing.

By following the tips I outline above, you can learn to overcome your investing fears and reach your goals.

Author Bio: Jon writes at Penny Thots, a personal finance blog that helps people improve their finances one day at a time. There you will learn other tips and tricks to better your money situation.