There are a number of reasons why people don’t invest and while some of them are valid, many of them are based on misconceptions and logic that do not make sense, which can be due to a lack of knowledge and understanding. Emotions also play a big role, fear being the most notable.
Here are some of the most common reasons why people don’t invest:
1. Saving money into a bank account
Some people tend to accumulate cash funds in their savings as they see this as less risk. However, depending on the interest you are receiving, if this is lower than the inflation rate, you could be losing money.
Yes, having savings for cash funds you require or may need to access in the short term is a great idea, but anything over this could be put to better use and if you want it to grow, then investing is one way to do this.
2. I’m afraid I’ll lose it all
It’s important to remember that the stock market has been around for almost a century and while we have seen some big market downturns, on average it has provided an annual return of 10%, and has never lost more than 43% in a single year. The key to not losing it all is a well-diversified portfolio, you are much more likely to lose it all if you have a concentrated investment portfolio.
3. I will wait until I have a higher salary
Half the battle is getting started. There is no minimum. The first step towards investing is to start saving. This will become a habit and you will be surprised how much you can accumulate if you put your mind to it.
4. It’s too hard to figure out when to get into — or out of — the market.
It’s human to want to make the right decision when it comes to investing. Many people try to time the market and may delay investing as the market is too high or want to wait for the prices to go down, but fear can set in causing further delay. Getting in and out of the market is not investing but gambling, you need to pick the right time to get in and out. Statistics show that it is unlikely that an individual is able to pick the right stock at the right time, especially more than once. The solution is not to try and time the market. When you decide to be a long-term investor this is no longer a question.
5. I don’t know where to start, there is too much to consider
If you are new to investing it can be intimidating and hard to understand some of the concepts. However, you don’t have to do this alone, this is where a Financial Adviser can really help.
What’s holding you back? Are any of the above excuses holding you back from truly achieving your financial goals? If any of these excuses are familiar, then it may be time to seek the help of a Financial Adviser to help you navigate the investment experience.
Caitlyn Kent (GDipFinPlan, DipFP, BCom[Acc]) is an Authorised Representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.
Any information provided to you was purely factual in nature. It has not been taken into account your personal objectives, situation or needs. The information is objectively ascertainable and is not intended to imply any recommendation or opinion about a financial product. This does not constitute financial product advice under the Corporations Act 2001 (Cth). It is recommended that you obtain financial product advice before making any decision on a financial product such as a decision to purchase or invest in a financial product. Please contact us if you would like to obtain financial product advice.