Afraid You’ll Make an Investing Mistake?
You want to grow a nest egg but worry whether now is a good time to invest? Even if stocks will be higher in 10 and 20 years, as investor Warren Buffett and many others forecast, that doesn’t mean you can’t lose money. And who wants to do that?
So learning to invest—and perhaps losing money along the way—is not unlike some risks we’ve learned we can take…driving, flying, moving, starting a business, getting married, having kids. But many wanna-be investors won’t jump in because :
- they think investors must be wealthy,
- they worry it’s not the best time to invest,
- they aren’t experts, or
- they’re afraid they’ll make a mistake.
Actually investing is a skill you acquire over time, much like learning to tie your shoes, play piano or pitch a baseball. And it’s a skill you need to build wealth today. You can’t just leave your nest egg parked in a savings account today and expect it to grow. It won’t.
So what do you do? Here are five tips to help overcome investing jitters:
- Expand your financial vocabulary. Whether you’re contributing to a 401k at work or buying your first shares of a company’s stock, it’s crucial to understand the language of personal finance. Maybe you’ll start a small notebook and have a “financial word of the day” list. For finances – like in reading – knowledge is power.
- Expect you’ll never bat 1000. Practice makes perfect and you’ll get better as time goes on. But just like pro baseball players, investors don’t bat 1,000 nor hit a home run every time. Great investors don’t either. Yet the longer you keep your money in the market, the better your odds of making a profit. You’re playing the long game here.
- Open an investment account…because you can’t win if you don’t even play. In order to invest, you need to have the right tools and accounts set up. An investment account is not the same as a bank savings account. (You typically need both.) So search for account applications at brokers such as Charles Schwab and fill one out.
- Starting small is just fine. It’s just as eye opening to learn from a small mistake as it is a big one – and a lot less painful on the investment account. Small amounts add up too, particularly if you keep that money invested and let the power of compounding work for you. Again, you’re playing the long game.
- Learn from others who invest. Having a mentor and hanging around peers who talk about money and investing opens your mind to investing ideas and helps hone your skills. If your friends don’t like to talk about things like money and investing, check out a nearby investment club. (The local library may have contact info or check with American Association of Individual Investors or the National Association of Investors Corp.)
You know, Warren Buffett said he started investing before he graduated from high school. Do you think he was an expert or wealthy then? No, he became that way over time. So can you. Today is a good time to begin.
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