“I want to invest, but I’m scared of losing all my money. I know it’s a limiting belief, but I can’t seem to get around it. What can I do to get over my fear of investing?”
This is a really common question, one which I think many of you can identify with. There’s quite a lot to consider around this, so I’m going to break it down into 5 different parts; stocks, funds, investment amount, your risk tolerance and your mindset.
How Can I Overcome My Fear of Investing?
Fear of investing generally stems from stories of people losing fortunes. It’s hardly surprising; these are the stories that are creating headlines. But ultimately, the highs and lows of your investing journey depend on how you approach it.
For example, let’s say you decided to pick individual stocks for investing. You have £1000, and you want to put a third of your investment into three different companies. These companies are well known, and you’ve used their products/services, so feel confident in putting some money behind them. But then something happens and one of those companies goes bust, as we’ve recently seen from the pandemic.
In situations such as this you can lose money. There’s a lot of work involved with this kind of investing; you have to make sure you research the company, the price point and the state of the industry. The health industry as an example is booming because of the vaccine, whereas the retail industry may not be so great due to lockdowns and a level of uncertainty. If you pick stocks, you must be prepared to move them around quickly.
If you chose to invest in funds (collections of 100s of different companies), a fund manager would manage those funds for you, deciding which companies stay or go, or you can get self-cleansing funds.
If every single company in a fund went bust at the same time, it would likely be due to something we all need to fear like a zombie-apocalypse! The idea behind putting money into a fund is that essentially, you’re spreading your investments across lots of different companies and hedging your bets.
How Much Do You Have to Invest?
Most people who worry about investing do so because they’ve heard stories about Bitcoin, or people throwing all their money into property, and it all goes wrong. But you don’t have to invest all of your money.
You might only have a small amount to invest. And as long as you’ve got an emergency fund, insurances, healthcare, your essentials and bills covered and you can still afford to have fun, you’re not putting all of your money into investments. If you were to lose money, it wouldn’t be a disaster.
Investing isn’t about throwing all your money into one pot and just hoping it’s all going to work. It’s about being strategic and smart. It’s about not having every single penny invested, and ensuring you still have other funds available when you need them.
What Is Your Risk Tolerance?
How would you feel if your investment value dropped by a certain percentage? We often think of the good side of investing, but there can be a downside, which is what prompted the question/title of this post. Your investments will drop at times because the stock market doesn’t just go up and up, it goes down, too.
Bitcoin and other crypto currencies have just seen a big drop in the market. Then, in theory, you could lose money IF you withdraw your investment. The value may have dropped on paper, but until you physically move that money, the losses aren’t tangible.
If the idea of losing money makes you feel sick, you have a low tolerance for risk. On the other hand, if you don’t mind a slight dip and you’re not tempted to remove your money, you have a medium tolerance. And if you understand it goes up and down and know that it could go down by 30 – 40%+, you likely have a high tolerance for risk. For more information about risk tolerance, check out podcast episode #55, How to Manage Investing Risk.
Your Money Mindset and Fear of Investing and Losing Money
Yes, there are times when you could lose your money. There is always a risk of investing in something which could lose value quickly. Your mindset is key when you’re investing, and if you get scared at any stage, your mindset needs to be tweaked. There’s another podcast which can help with this, episode #26: How to Invest in a Crisis.
Investing does require a certain level of skill, which you build up over time, but it’s mostly about your mindset and holding your nerve if things become turbulent (which women are really good at by the way!).
If you don’t really understand what investing in the stock market is all about, then feeling uncertain and scared is totally understandable. This can be overcome with knowledge though. It is NOT beyond you to learn.
When you understand your risk tolerance, know how to analyse the stock market, know not to invest all your money and are doing your due diligence, there’s no need to be scared. You’re putting the time and effort in to do things properly, instead of just throwing spaghetti at the wall and hoping something sticks.
I see a lot of people put their finger in the air and randomly pick an investment. But have they even looked at it? Do they know how it fits in with the bigger picture? Investing is a part of your whole financial ecosystem; not just one thing.
If you have a burning desire to learn how to do this, I can help
Today is the FINAL day of a 3-day flash sale I’m holding of my investing course, The Beginner’s Investing Success Plan.
(just because it’s my 4th business birthday)
This ends at 11.59pm BST TODAY.
The flash sale is an awesome opportunity to get into the investing course for 40% off before I reopen it again in October (when it’ll be back up to normal price).
USE CODE AT THE CHECKOUT: 4BDS
Go here to find out more: https://thefemalemoneydoctor.com/birthday-investing/
I really don’t want you to miss out because you have a fear of investing. It’s too important not to make you aware of the good stuff you’ll learn to overcome it and expand your wealth.
Feel free to send me any questions: [email protected]
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