3 Things I Did to Get Over My Fear of Investing
Here's how I'm able to stay calm while owning stocks.
- Many people worry about investing because it opens the door to potential financial losses.
- I was able to overcome that fear by building cash reserves, educating myself, and easing my way in.
These days, putting money into my brokerage account is something I don't think twice about. But that wasn't always the case.
Before investing became a regular thing for me, it was something I feared a lot, so much so that I shied away from doing it for years. Now in hindsight, I do regret putting off investing for so long, because had I started earlier, I would've had a chance to grow my portfolio even more.
But still, it's better late than never when it comes to investing, so if you've been letting your fears hold you back, you may want to try to figure out ways to move past them. Here are three tactics that worked for me.
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1. Building a solid emergency fund
When you invest your money, you may see the value of your portfolio drop from time to time. This especially applies if you own riskier investments like stocks or cryptocurrency.
That said, the losses you see on screen when you log onto your brokerage account aren't official until you go and sell off investments at a price that's lower than what you paid for them. Recognizing that was a big step for me, because it empowered me to do something that would help me invest with more confidence -- build an emergency fund.
Generally speaking, it's a good idea to have enough money in savings to cover three to six months of essential living expenses. But more so than that, having a fully loaded emergency fund could prevent you from having to cash out investments when they're down and lock in losses if you encounter a need for money.
Say you need to come up with $1,000 to fix your car, and you don't have the cash in your savings account. If you have a portfolio of stocks, you may have to sell some to come up with that money. And if you're forced to sell when your stocks are down, you'll end up taking a loss.
But since building my emergency fund, that's a risk I haven't really been taking. And even to this day, knowing that I have a solid level of emergency cash makes it easier to see my portfolio value drop. I know I'm not touching that money and if I wait things out, there's a good chance my balance will rise again.
2. Asking for help
When I first started buying stocks, I was pretty clueless. I had no idea how to decide which companies to invest in and was inclined to just buy the stocks I'd heard about a lot in the news.
Thankfully, I quickly realized there are a lot of resources out there that can help you get started on the investing front. In fact, many brokerage accounts come with their own set of educational resources for that purpose, and if you're new to investing, it pays to take advantage of them. The more knowledge you acquire, the easier it becomes to be less scared of investing.
3. Starting slowly
When I first started buying stocks, I didn't buy $10,000 worth of shares overnight. Instead, I started slowly with several hundred dollars and gradually increased that sum.
If you're nervous to invest, there's nothing wrong with only investing some of the money you have available. If you're sitting on $2,000 you don't need for emergencies, start by opening a brokerage account with $500 and see how you feel from there. If you find that you're not losing as much sleep as expected, invest another $500 and see how that goes.
Investing can be a nerve-racking prospect, especially during periods of stock market volatility. If your fears have been preventing you from investing, it may help to build a nice amount of emergency savings, learn more about how to invest, and start slowly. Investing your money is a great way to grow wealth over time, but it's also important to be comfortable with it.
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