“Some of my friends were talking recently about how they made some good profits in the stock market recently. However, it was my understanding that if you invest in stocks you can lose your money.
“I really have worked hard for my money and I don’t want to get involved in anything where I could lose any of it. I’m wondering if there’s something I’ m missing by being afraid of investing in stocks.”
I can relate very well to your fear of investing in anything that could lose money. Many years ago, when I had just started working in an investment brokerage, I had to do an exercise to invest some money in stocks and money market accounts.
I didn’t know anything about the stock market at the time, and I remember saying to myself “Why would anyone want to put money into an investment that could lose money?“ I reluctantly placed twenty percent of my available funds (the minimum allowed) into the stock market, and prepared for the worst.
Three months later, at the end of the exercise, I realized that the twenty percent that I had placed in stocks had vastly outperformed the eighty percent that was invested in the money market accounts. I realized then that my fear of investing in an unknown product had stood in the way of me making a lot more money.
Many people struggle with different kinds of fear when it comes to making investing decisions. Fear based on a lack of knowledge about the investment world is one of the major drawbacks that prevent people for maximizing returns on their money. I have seen people with large sums sitting in commercial bank accounts earning less than five percent per annum, just because a savings account was all they knew about.
With access the internet, investing shows on cable television, and free advice available from most financial institutions, we really have no excuse not to find out how to make our money earn more for us.
You don’t have to be afraid of looking foolish by asking a lot of questions if you are not clear. Make it your business to learn and to try a new form of investment that may help you to achieve your goals.
Another type of fear that prevents people for taking risks to make more money is the fear of making a mistake with the investment. Many people with great business ideas don’t even bother to take the plunge because they are afraid of not doing it right and losing all their money. Safety of their principal is more important than taking a risk that could mean great returns.
Want to learn how to be a smart investor? CLICK HERE!
The reality is that you can get professional guidance that can reduce your risks in business or other types of investments like stocks or currency trading. Educating yourself is the first step, but if you really want to make more money this year, you may have to be willing to increase your risk appetite.
Nobody likes to lose money in an investment, but I have personally found that every wrong investment decision that I have made, has taught me a valuable lesson that has helped me to eventually make more money.
A good way to start testing the waters is by investing a little bit of money in a riskier type of investment like the stock market. Some stock brokers allow you to start with as little at J$10,000, and you really only need to buy a minimum of 100 units of any stock.
Make sure that you only invest what you can afford to lose without worrying, and use the exercise to learn more about the investment product.
Another dominant fear that prevents people from making more money is the fear of knowing how bad their financial situation really is. I have spoken to many clients who refuse to prepare a budget because they know that it will reveal their disastrous spending habits and their lack of assets. The fear of being honest about their situation keeps them trapped in an endless spending and debt cycle.
As we start a new year, decide to be honest with yourself and admit it if your financial situation is less than perfect. Taking that first step might be depressing at first, especially if your financial picture is less than rosy. However facing reality will help to empower you by revealing exactly what you need to do to improve your finances and to start making your money work for you.
So what are you afraid of? Face your fears today and visit a financial advisor who can help you to find solutions to your problems.
Copyright © 2007 Cherryl Hanson Simpson. No reproduction without written consent.
DON’T MISS MY NEXT ARTICLE! CLICK BELOW TO RECEIVE IT IN YOUR EMAIL:
Subscribe to Financially S.M.A.R.T. by Email
Originally published in The Daily Observer, January 4, 2007
Cherryl is a financial columnist, consultant and coach. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl