Investing in stocks from a young age is an effective means of growing wealth. Unfortunately, I missed that boat to some degree.
See, I didn't start investing in stocks until I was almost 30. Part of that had to do with the fact that I had other goals and pressing financial matters to address first, like paying off the debt I'd incurred in the course of getting my degree. But a big part of it was that I was genuinely scared to invest.
In fact, when I did begin investing, I initially put the bulk of my money into bonds for the stability involved. But then I did some reading, and it soon became clear that loading up on bonds was not the best choice for someone my age. Rather, stocks were a better bet -- whether I liked that idea or not.
It took a lot of internal coaxing for me to buy my first stocks, but at this point, investing doesn't scare me at all. Here are a few things I did to help me conquer those fears.
1. I built a solid emergency fund
I used to worry that I'd buy stocks only to have them tank at the worst possible time -- say, when I needed money for an unplanned bill. To address that concern, I made an effort to boost my cash reserves in the bank. At this point, I have about a year's worth of living expenses in savings, and while that money is earning practically nothing these days (thanks, record-low interest rates), it's also serving as a means of protection for me in the event of a stock market crash.
The only way to lose money when stock values decline is to sell off investments for less than you paid for them. Now that I have a robust emergency fund, I shouldn't need to touch my stocks in a pinch, which means that if the market crashes, I'm positioned to just ride it out. And that makes investing a lot less scary.
2. I did a lot of research
Part of the reason I was initially scared to invest is that I knew nothing about picking stocks. So I did my research. I read up on what to look for in a stock and figured out how to establish a strategy based on my risk tolerance. I also did some digging to find out what constituted an appropriate asset allocation based on my age, which is how I realized that moving away from bonds and going heavier on stocks was the right call.
3. I dug into the stock market's history
The idea of a stock market crash is scary -- until you do your research and see that the market has experienced many downturns and ultimately recovered from every single one. In fact, there have been more bull markets (periods when stocks are up) than bear markets (periods when stock values drop 20% or more from a recent high) over roughly the past 100 years, and all told, stock values have managed to climb -- substantially -- during that time. Knowing that gives me a lot of comfort.
To be clear, I didn't go from being a skittish investor to a confident one overnight. It took years before I was really comfortable with the portfolio I built, and before I got used to the concept of stock market volatility. But ultimately, buying stocks is something I need to do to meet my personal financial goals, and chances are, the same applies to you. And the sooner you take steps to work past your fears, the more opportunity you'll give yourself to grow the wealth you want.