There was a time in my life when investing in stocks scared the heck out of me. The idea of potentially losing money due to circumstances outside my control made me want to hoard cash in the bank, even if that meant snagging minimal returns.
But then I got wiser and started to learn more about investing. And at this point, the idea of owning stocks doesn't make me lose sleep at all.
If you're nervous about the idea of buying stocks, it's important to work past that fear. Investing in stocks could be your ticket to growing wealth and meeting important goals, like having enough money on hand for retirement. And these three tactics could make it easier to invest in stocks despite the trepidations you have.
1. Load up on index funds
Handpicking individual stocks can be nerve-wracking and requires lots of research. If you're not confident in your stock-picking ability, index funds are a great solution.
Index funds are set up to match the performance of the different indexes they're tied to. An S&P 500 index fund, for example, will have the goal of performing as well as the S&P 500 index itself.
Index funds take a lot of guesswork out of investing. They also offer immediate diversification because you effectively get to own numerous stocks with a single purchase. And a more diverse portfolio protects you during market downturns.
2. Look at fractional shares
There are many quality companies out there that have an individual share price that costs hundreds of dollars. And plunking down that much money on a single share may be daunting if you're coming in as a nervous investor. That's why fractional shares are a good bet.
Fractional shares allow you to buy a portion of a share of stock rather than a full share. If you're on a budget, fractional investing could allow you to build a more diverse portfolio. This way, you're not sinking too much cash into a single company you may only have limited confidence in.
3. Don't check your portfolio balance every day
The stock market can be very volatile -- so much so that a $100,000 portfolio one day can sink to $95,000 overnight. Of course, that's a significant dip, but over time if you stay the course (meaning, you don't panic sell when stock values decline), you're likely to make money in stocks.
If you're a nervous investor, one of the worst things you can do is check your portfolio balance frequently. Doing so could not only make you worry needlessly, but also drive you to make rash decisions -- like selling prematurely -- that could cause you to lose money. Instead, decide that you'll do a quarterly portfolio review.
Push past your fears
A lot of people start out scared to invest until they develop a strategy and realize that on a long-term basis, the stock market has a solid history of rewarding people who stick with it. And trust me, I used to be one of those nervous people myself.
But one thing you shouldn't do is let your fear of the stock market prevent you from growing wealth. These tactics could help you get around your hesitations -- and come out a lot richer in time.