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Investing can be a daunting prospect for many people. The fear of losing money, making the wrong choices, or simply not understanding the process can create significant anxiety and keep you out of the market. However, overcoming this fear is essential for building wealth and achieving financial goals. In this article, we will explore the reasons behind our fear of investing, why it’s important to address it, and effective strategies to overcome this fear.
Why Do We Have Fear of Investing?
- Fear of Loss: One of the most common fears associated with investing is the fear of losing money. The stock market and other investment vehicles can be volatile, and the possibility of seeing your hard-earned savings diminish can be intimidating.
- Lack of Knowledge: Many people feel overwhelmed by the complexities of investing. The jargon, various investment options, and market fluctuations can create confusion and uncertainty. This lack of understanding can lead to avoidance rather than action.
- Influence of Media: Sensationalized news reports about market crashes or economic downturns can heighten anxiety and reinforce negative perceptions about investing.
- Past Experiences: Negative experiences, whether personal or observed in others, can contribute to a fear of investing. Stories of friends or family losing money in a market downturn can reinforce the belief that investing is inherently risky.
- Perfectionism: The desire to make the “perfect” investment can paralyze potential investors. The fear of making a mistake or missing out on the best opportunities can lead to inaction.
Why Should We Deal with the fear of investing?
- Building Wealth: Unless you win the lottery or receive an inheritance, investing is one of the most effective ways to build wealth over time. By overcoming the fear of investing, you open yourself up to opportunities that can significantly enhance your financial future.
- Inflation Protection: Keeping your money in cash or low-yield savings accounts can lead to a loss of purchasing power due to inflation. As an example, in France during 2023 the ‘Livret A’ had a 3% interest rate when inflation was 5%. It means -2% real interest. Investing allows your money to grow and keep pace with or exceed inflation rates.
- Financial Independence: Overcoming your fear of investing can be a crucial step toward achieving financial independence over time securing your retirement. It enables you to create passive income streams and secure your financial future.
- Empowerment: Gaining confidence in your investing abilities can empower you to take control of your financial decisions. This sense of empowerment can lead to better financial habits and overall well-being.
In few words, a good way to overcome this fear is to feel the opposite: excitement! As example: Think about how your future could be if you manage to become financially independent?. What would you do? How will your life change?
Strategies to overcome the fear of investing
Educate Yourself
Knowledge is power. Take the time to learn about different investment options, market fundamentals, and strategies. Online courses, books, podcasts, and reputable financial blogs can provide valuable insights and help demystify the investing process.
- We would recommend to select the investment type of your preference (ex: Real estate), and then deep dive to acquire enough knowledge prior to start investing. Understanding why prices go up or down, what investments are profitable or not, is essential to be successful and not getting frustrated.
Diversification
It reduces risk by spreading your investments across different asset classes, industries, and geographic regions. A diversified portfolio might include:
- Stocks: Shares in individual companies.
- Bonds: Loans to companies or governments with fixed returns.
- Mutual Funds and ETFs: Collections of stocks or bonds managed by professionals.
- Real Estate: Property investments can provide rental income and capital appreciation.
Seek Professional Guidance
Consider consulting an independent financial adviser in France (CGP-I: Conseiller de Gestion de Patrimoine Indépendent) to help you navigate your investment journey. A professional can provide personalized advice, help you create a tailored investment strategy, and offer reassurance during market fluctuations.
Practice Mindfulness
Addressing emotional responses to investing can be beneficial. Techniques such as mindfulness and meditation can help you manage anxiety and develop a more balanced perspective on investing.
Stay Informed but Avoid Overconsumption
While it’s important to stay informed about market trends and economic news, excessive consumption of financial news can heighten anxiety. Limit your exposure to sensationalized media and focus on credible sources.
Join a Community
Engaging with like-minded individuals can provide support and encouragement. Whether it’s a local investment club or an online forum, sharing experiences and learning from others can help alleviate fears.
Learn from mistakes: Every investor makes mistakes. Instead of fearing them, view mistakes as learning opportunities. Reflect on what went wrong and adjust your strategy accordingly.
Our experience investing in France
Like many foreigners arriving in France, the first couple of years were spent settling in and getting the basics in order. Our first investment was in real estate when we purchased our first apartment. It was a stressful journey, considering the language barrier, local specifics, and the size of the mortgage!
Only after a couple of years, our real estate investment prove to be a good decision. It gave us the confidence to continue exploring new investment types, such as the stock market, private equity, crowdlending, and even cryptocurrencies.
Learning the Hard Way
We made the mistake of diving into private equity by investing in a startup that ultimately went bankrupt. This was painful, as we had invested a significant amount of money. In hindsight, we should have started with a smaller investment. While this setback did not deter us from continuing to invest in this area, we learned a valuable lesson: to decrease the amount per company and diversify our investments.
A similar experience occurred with stocks when we began stock picking without conducting thorough due diligence, often selling too quickly. This approach led to losses and frustration. To correct this situation, we started investing progressively (same among each month) in ETF’s.
Finally, the Way Forward
We have found our way forward acquiring a wealth of knowledge by consuming various personal finance content , which has helped us increase our wealth over time. We realized that we were missing several key components:
1. Concrete Objectives: What do we want to achieve with this money in the short, mid, and long term?
2. Defining a Strategy: How do we plan to make it happen? Where do we want to invest? How much should we allocate? What are our expected outcomes for each investment product? What triggers will prompt us to sell?
3. Tracking and Fine-Tuning: For this, we use Finary (check our Deals for a referral offer), an excellent tool that consolidates our investment data from multiple sources and provides incredible analytics to support our strategy.
By addressing these areas, we have been able to refine our investment approach and build a more robust financial future.
Conclusion
Overcoming the fear of investing is a crucial step in achieving financial success and independence. By understanding the root causes of this fear and implementing effective strategies, you can build confidence and take control of your financial future. Remember, investing is a journey, and every small step you take can lead to significant rewards in the long run. Embrace the process, educate yourself, and start as soon as you can.
Remember, the biggest risk is not investing at all. The average income lost in France is 25% once retired! Embrace the journey, learn along the way, and watch your money grow. Start today, and take the first step toward financial independence and security.
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Please remember that we are not financial advisors. We are just sharing our best understanding based in our own experience. This blog is for educational purposes only. Do not make investment decisions solely based on what you read in this blog. What works for us, may not for you. Do your own research and look for professional service if required. Read our full disclaimer in the ‘about’ page.
Bon Investissement! 😉
