I'm an ardent advocate of investing. For many, nothing matches the thrill of a good investment. It can be life-changing for you and your family in the short and long term. But there are many different types of investment vehicles, from stocks, bonds, and real estate to business ventures and things you've never heard of. But if you don't really understand investing—or money for that matter—investment fears set in. Those fears can stifle your capacity to manage your money and investments successfully unless you confront them head-on.
Warren Buffett's Ideas Regarding Investment Fears
Consider the advice and insights of financier Warren Buffet:
- If you place money in the stock market, do so with a long-term outlook. Learn to be comfortable with short-term losses to reap the rewards of long-term gains.
- Two emotions most experienced by (and detrimental to) those who invest in the stock market are greed and fear. Greed can make you stay in an investment too long and erode your gains in the search for more. Fear can make you drop out too soon before an pays off or bounces back.
- During market fluctuations, smarter investors do the opposite of what the majority of investors do.
- When "everyone" is saying how great the stock market is doing, this is the time to be leery. Don't necessarily follow the crowd when it comes to your investment portfolio.
- On the other hand, when the market is down and everyone's investment fears are on high alert, that's the best time to buy. Everything costs less in a down market and if you're investing for the long haul, you're bound to make a profit long-term.
Additional Points to Ponder Regarding Your Investment Fears
- The stock market will rise and fall. If you're investing in the stock market, accept the fact that it is unpredictable. Even stock analysts can't predict with perfect accuracy which stocks and funds will soar and which will tank.
- Take your current situation into consideration. If you're due to retire in 5 years, you might not have enough time to reap the benefit of aggressive growth stocks or other high-risk investments. More moderate and stable investments are likely better. However, if you still have 15 or 20 more years of working and saving, an aggressive strategy may be right for you.
- Be vigilant about diversifying your investment portfolio. Diversification provides some built-in protection against suffering major losses. Have a mix of stocks, funds, or other investment types to help offset periods of underperforming assets.
Confronting and Handling Your Investment Fears
How can you minimize your investment fears? Try these strategies:
- Use your investment fears to your advantage. Fear and anxiety are normal human emotions that help you prepare and respond to challenges and threats. Understand the questions and uncertainty surrounding specific fears and learn to address them.
- Take baby steps. You don't have to bet the whole farm on day one. Start with small investment goals to build your knowledge and confidence. If you have a 401k, start being more proactive about monitoring and managing it. If you have money in a non-interest-bearing savings account, consider switching to an account that pays interest. Pick and track a few stocks or funds before actually buying them.
- Minimize your risks. Remind yourself that if you've diversified your investment portfolio as investment experts suggest, your chances of losing large amounts of money are greatly reduced.
- Make wise investments in spite of your fear. Thoroughly research your investments and make "Feel the fear and do it anyway" your personal mantra. With judicious investments, your money will grow and this, in itself, may lessen your fears.
- Make one or two investments when prices are down, as long as you've got some years to watch your money build. As your profits grow, make a few more investments. Getting used to making investments puts this activity into your comfort zone, where it's less scary.
- Talk to people you know about their investment experiences. People have different ways they approach investing. And they've likely all had different ups and downs. See what you can learn from other people's investment mistakes and successes.
- Consult a financial advisor. It's great to learn as much as you can about investing. Working with a financial advisor can help you maximize your success. If you have a retirement fund or brokerage account, find out what options are available to you. Also, check if your community offers financial advising programs.
Learning to confront and handle your investment fears is important for your investment life. Gathering information from market experts, your network, and examining your feelings about investing can make the difference between allowing your fear to consume you and moving through your fear to skillfully build and manage your portfolio.