Why is Investing so Scary?

What?

Investing is scary! I know because when I discuss it with friends, family, and clients, I receive the same petrified look.

People who are comfortable in this world often overlook how daunting and scary it is for average people. This fear is what drives a huge percentage of Americans to never invest at all.

But why is it so scary?

Why?

Below are a five reasons why it’s so scary to invest:

1. Jargon: I’m jargon-allergic, but unfortunately, my profession and field loves jargon! Sometimes it feels like the financial services industry is going out of its way to make investing overwhelming and confusing. The use of jargon (expense ratios, IRAs, dollar-cost-averaging, etc.) only serves to frustrate, confuse, and annoy people.

2. Conflicting Advice From Questionable Sources: Investing doesn’t have a single path to success, even though there are lots of people on social media who would love to sell you one (crypto, stocks, starting a business, real estate, etc.). This “advice,” labeled as “not advice” for regulatory and legal reasons, is often from social media influences, random friends and family, or entertainers, such as Jim Cramer.

3. Natural Biases: We all have natural biases, one example is our loss aversion. As humans we tend to feel losses twice as much as gains, which makes it difficult to invest.

4. Lack of Education: We never learned how to invest in school or when we started our first job. It’s a critical piece of education that we all need, but were never taught. Think about if you were never taught to read, but somehow expected to know how to do it! This is what’s happening with investing and personal finance. It’s a critical skill that you are expected to have as an adult, even though you were never taught!

5. Too Many Options: We live in arguable the greatest time to be an investor, both from a cost and option perspective, but the more options you have, the more difficult it can be to select the right assets for your needs.

Facing Your Fear

1. Educate Yourself: There are multiple ways to overcome the fear factor and education is certainly key, but due to the volume of books, mine included, podcasts, shows, etc. it may not be the best answer. I encourage learning as much as possible, but you may find yourself feeling more overwhelmed due to conflicting opinions, spins on data, and "salesy" sources.

2. Just Start: Imagine being bitten by a shark the first time you go swimming in the ocean. You'd be pretty hesitant to jump back in, right? That's the same way people feel about investing after they've had a negative experience. This goes back to our loss aversion. Starting is critical, but can also backfire!

3. Professional Help: The best way to overcome your fear is to get professional help from someone you are comfortable with and who is a Certified Financial Planner. Money, finances, and investing are sensitive topics and you want to work with someone who makes you feel at ease. If you or someone you know would benefit from personalized coaching on investing (and everything else) please schedule a free introductory meeting to learn more! For just $5/day, it’s the most affordable way to gets started!

Disclaimer: The information in this post is provided for your convenience only and is not intended to be treated as financial, investment, tax, or other advice. The information is intended to be educational and is not tailored to the investment needs of any specific individual.  It is also not intended to be relied upon as a forecast and is not an offer or solicitation to buy or sell any securities or to adopt any investment strategy.  The opinions expressed are those of the author.  Reliance upon the guidance and information in this presentation is at the sole discretion of the individual.