It’s 3 am, do you know where your money is?
If it’s like most Americans, not out working for you!
We know investing is a vital part of building wealth. We see glossy magazine ads showing elderly couples buying yachts and sailing off into the sunset in retirement, we hear it at our jobs and in the news so we know we need it if we want any hope of exiting the rat race when we are 65.
Staying out of the market for several years, or all together severely impacts our ability to retire on time and at the level we desire. It’s the opposite of what we want so why do we do it?
It’s the same reason we stay in a bad relationship even though we know leaving is the only way to happiness. We are scared of the unknown, that we won’t actually be happier our of the relationship or that it’ll be worse. So we stay paralyzed.
Unfortunately there is no way to out think fear. No rational amount of data can change what our emotions shape as reality, but we can help talk ourselves off the cliff and have less fear about investing. At least enough where we can dip a tow in the pool with some action.
Fear #1 It’ll take too long too much paperwork. I don’t have time for that
Because our retirement has a monumental impact on our future we have convinced ourselves that opening an investment account is a laborious event that takes all day.
After all, the more important the task the more time it takes, right?
That fear drives us to keep putting off opening the account, until later today turns into next week, which turns into at some point, then into our new year’s resolution … for the next 3 years.
This might seem insignificant, but time is our most valuable asset! Every year lost causes harm to your future savings that cannot be regained without an exponentially higher saving rate.
And most investment vehicles are pretty quick to start.
Even joining your company’s 401k is a phone call or sign in a way. Even if you aren’t completely sure what to choose with most plans you can go back and quickly make changes later. No tax return, bank statement, grandmother’s birth certificate or any other wonky barrage of paperwork needed. I promise.
How many times have you had something so powerful be done so quick? I’ve had haircuts take longer than opening an account!
Takeaways: Starting to invest is faster than you think. You don’t need any special documentation, just your SSN, a funding account and your name
Fear #2 It’s hard and too confusing
No one will know everything about investing, and the industry doesn’t try too hard to clear it up for you either.
Actively managed mutual funds can have long, complex and legalistic prospectuses. It’s like they purposely make it hard to read, and, in some instances, they actually do!
But if getting into the weeds is your thing, you’ll be happy to know that legistation1 has improved the transparency of funds. And the internet provides basic investment information at the tip of your fingers. However, if you want to hit the ground running with what you know right now, then a robo-advisor investing in index funds will do all the heavy lifting of fund choices for you.
They act as a virtual financial advisor managing your investments for you. All you need is your social security number, your name, and a bank account and you can be done in 15 minutes or less.
They ask you your goal, recommend an account type, as well as risk tolerance based on your current age, income and the age you would like to retire. These tools allow for a simple and inexpensive way to get started in investing. You don’t have to understand the ins and outs of stocks and bonds etc. They allocate your portfolio based on the recommendations and you can take the recommendations or change them at any time. And periodically rebalance on its own.
Take Aways: A robo–advisor can recommend a portfolio (with index funds, aka exchange-traded funds) based on your customizations. It is a simple, clear way to get started.
Fear #3 I can’t save even a dollar more
I understand. Being saddled with credit-card or student loan debt, you might not have a whole lot of money just laying around to invest. But you don’t need to be rich to invest. Or need thousands or even hundreds of dollars to start. It’s better to start with any amount, than delay starting altogether. But if you feel you are stretched to the max and can’t find another dollar then stash, accorns.com and qacapital.co can help.
Accorns.com automatically rounds up your purchases made on debit/credit card and adds the additional cents to a diversified investment account for you. Twenty-three cents here, eighty-seven cents there all those cents add up without you lifting a finger.
If you want to accumulate faster but still don’t want to think about saving, then try qacapital. It’ll round up your purchase, or save a set amount per week to help you save.
Takeaways: If you feel you don’t have another penny to invest, then use qacapital or acorns.com. It can be fully automated and uses your spending habits to help you save.
Fear #4 I don’t want to lose all my money, cash is safer
It is understandable to not want to lose your money. You work hard for it, and the purpose of investing is to grow your money, not lose it. But one thing history has shown us is that market correction, and recessions are cyclical.
Whatever your portfolio looks like at this moment, good or bad, it isn’t permanent or realized, until you decide to cash out your chips.
So, that means if your portfolio is appropriately risked (meaning as you get closer to wanting to cash out then you make secure investments) then market losses can be recouped over time in a diversified portfolio.
And according to Adam Freedeman, CIO at CircleBlack, even a worst-case scenario isn’t that dire if you have a long-term horizon. For example, if someone was unlucky enough to invest $1000 in the S&P 500 at the height of the market before the 2008 crash, if they had continued to invest $1000 each year, then in 2 years they would have made their money back.
But if you’re still feeling that you want to keep cash rather than risk it in the market. Then remember that cash doesn’t come without risk either. Interest rates are currently abysmal and cash placed in a savings account is still losing value every year due to inflation.
Choosing to do nothing, or just save under your mattress ensures that you’re $100 dollar today is worth 2% less tomorrow. At least with investments, you are able to make your money work for you.
Takeaways: Nothing in investments is guaranteed, but you might be better banking on a larger slice of the market using an index fund (also known as exchange-traded funds) to truly diversify. And saving with cash carries risk too.
Fear #5 I need confirmation I’m on the right track: I won’t even know if I’m screwing up until it’s too late
Starting to invest is one thing, but many times we need confirmation that the track we are on will lead us to sipping drinks out of a coconut on the beach later. That’s the only way we will stay the course when the cycles happen.
The great news is you don’t have to do this alone, You’ve got lots of help.
Finmason is a financial education company that will help you “(1) truly understand your investment choices, (2) identify and engage with professional investment managers, (3) validate and buy-into the manager’s advice, and (4) move forward with confidence”
Strongholdfinancial.com allows you to answer a couple questions and login to your current investments and they will create a report comparing your current investments to what they recommend… for free. If you like them, you can switch to them, if not then carry on!
And you can and should talk to a fiduciary financial advisor to get a financial checkup (I do so about twice a year). If something is going awry you will have time to fix it.
Takeaways: If you want to know how you are doing, or maybe even a try before you buy portfolio then you must check out finmason.com and strongholdfinancial.com respectively.
It is time
Imagine being able to spend without guilt knowing your money machine is working for you.
Imagine waking up at 3 am feeling confident that you will be able to have the life you desire because you’ve spent the time now to prepare.
You have the tools.
I know you can do this.
Wherever you are right now you can start. You invest at the level that you are comfortable with. Start small, start conservative, build your confidence whatever you like, just start. It’s your life. It’s time to stop being a spectator and get in the game of investing.