With inflation gobbling up your savings and life just becoming 10000x more expensive plus we’re all living longer means we need to be investing now more than ever. Saving ain’t gonna cut it. The problem is that so many of us don’t know where the heck to start. And if we do know where to start looking at the state the markets are in right now is most definitely not helping our case!
So it doesn’t come as much of a shock that 40% of Americans have ZERO investments. And the top 3 barriers holding them back are not having enough money to invest, not knowing where to start and feeling that investing is just too risky.
These are all valid reasons but here’s how you’re going to break these barriers so that you can get this show on the road. Your future self needs you to invest. Investing is how you grow your money. Cash is how you lose it. You know which one I’m going for!
Before we break those barriers, don’t let yourself or anyone else tell you can’t. You can, and you will. Anyone can be an investor. The great thing about the rise of fintechs and robo advisors is that you can started with small sums and you don’t need to be a whizz-kid. High IQs are totally irrelevant for this game.
So let’s get right to it!
#1 I don’t have enough money
This one is the biggest barrier for why we aren’t investing. As many as 44% of Americans who don’t invest say they don’t have enough cash.
I think that’s wrong. We don’t lack money, we lack priorities. The average American has 10 subscriptions, 60% of them get takeouts at least once a week and 64% of them are living paycheck to paycheck. Cutting down on a few subscriptions will easily save you $150+ a year! That’s cash that you can put straight to the stock market.
So analyse your spending habits. See where the bulk of your discretionary spending is going to and figure out places you can cut back. If you can’t find anything, look harder! And if you still can’t find anything, it’s time to shift from needs to wants. Most of what we buy (like coffee, subscriptions and whatnot) are wants that we confuse with needs!
But it’s not just what we spend. The media has a big fat part to play in all this. Ever since inflation’s pinched us in the backside, I’ve seen a stupid number of articles all saying the same thing: the young don’t have money to invest. With 10% inflation and high interest rates we’re being squeezed left right and centre. From our grocery bill to our rent, it’s all going through the roof and there’s barely anything leftover.
Funny though because we’re still travelling, dining out and doing all sorts of other things with our money. There’s clearly some disposable crumbs somewhere. We just have to shove it into our investment account.
But this scarcity mindset comes from the stuff we’re fed. We think we need loads of money to invest. That it’s only for rich people. This is a dangerous myth that creeps in. And frankly, it’s a load of codswallop! How do you think you get rich? By investing!
Every little amount that you set aside and invest is making a huge difference to your future. Don’t ever let anyone tell you otherwise. Now, thanks to investing apps like freetrade, trading212 and etoro, you can literally get started with as little as £1.
So don’t buy what the media says. They’re there to scare us and make money outa that.
#2 I don’t know where to start
Next barrier is not knowing where on earth to start. 31% of people who don’t invest say this is holding them back. And I feel ya. Investing is made out to be this place smart men in even smarter suits spend their time on. But it’s for everyone.
Ever since index investing became a thing in the 70s (thanks to Jack Bogle – check him out!) it has meant that you and I can get started on our investment journey without having to pay high fees to that guy in the suit.
ETFs are a great place to start. These track a particular market/sector and they basically buy everything rather than trying to pick the winners. Which as we know is pretty darn hard.
Take the S&P 500 index: if you own it, you’re buying into America’s 500 biggest companies. Can’t go wrong with that!
Warren Buffett said “by periodically investing in an index fund, the know-nothing investor can actually outperform most investment professionals.”
You can get started with ETFs like those which are available on many platforms. These are low-cost ways to get exposure and give you great diversification. Aka lower risk.
Do your research on them and see what suits you best.
Or you could go down the route of robo advisors. These are apps that invest for you. You invest each month and they invest it in a range of areas. Doing the hard work for you.
Thanks to us having tons of info at our fingertips, we can research things for ourselves. We don’t need to pay someone a fat fee for making us feel dumb.
Grow your knowledge and watch your confidence boom.
#3 I feel that investing is too risky
And risk is number 3 on the list of barriers. 23% said that investing being too risky is holding them back. But we’ve gotta shift our understanding of risk.
Risk is uncertainty. It’s the chance of bad – and good. And it’s high time we focus on the latter. Too much focus is put on the chance of bad stuff happening. If that’s how you think it’ll be 99% impossible to invest let alone stick to your stocks. So have a little faith.
Risk is the whole point! It’s why we’re investing! If there was 0 risk there would be 0 reward.
The problem is we think risk = bad. And that’s part of it. Sure, in 2023 it’s not been easy for markets though stocks bounce back sooner than anyone realises and risk is part of the game. Despite all the crap going on, S&P 500 is up 7.5% since Jan. That includes a fall of 7.7% but it’s in the green now.
You have to take a long term view. If you look at the chart of indices like the S&P you’ll see it goes to the right! There’s bumps along the way that at the time feel like gigantic pits but if you zoom out, they’re nothing more than blips.
There’s a risk to investing but there’s an even bigger risk to not investing.
Risk is why we’re investing. Remember that.
Just make sure you’re taking on the right amount of risk for you. If you’re diversified and are invested for 5+ years then you shouldn’t worry what markets are doing. Only what you are!
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment