Invest and chill. Investing shouldn’t be nose-bleed-exciting

In a recent Monday MoneyDrop, we broke down 3 investing hang-ups that tons of people have. Here’s 2 more mental blocks we heard from you.

>> Stock markets seem to stress my parents out.

If you constantly monitor the stock market, it’s 100% a recipe for freakouts. In any given year, it’s a toss-up whether your investments make or lose money.

So why put money into something that has a 50-50% chance of gaining or losing that year?
Because so long as you hold on and don’t sell when your stock is down, it’s the best way to grow money. Even when the stock market has down periods, it has always bounced back. Over 3-5 years, it becomes more 75-25% chance of gain vs. loss, and over 10+ years it’s nearly 100% chance of gain.

Holding on when it’s down is counter-intuitive!
Because when our investments lose value we stress. We want our cash back NOW; the last thing we care about is “long-term.” But remember, any “loss” in value isn’t real unless you sell your investment for cheaper than you bought it. (Remember when we said, if investing is nose-bleed-exciting then you’re doing it wrong.)

It’s against-human-instinct but when stocks nose-dive, it’s the time to “get in”, not “pull out”. Why? Because stocks are cheap (remember, you want to buy-low/sell-high) since many people sold and ran. So you pick them up at a discount, ride it out and watch your money grow when the market recovers. The best way to combat stressing about “the market” is:

1. Take extra income you have (doesn’t matter if $100 or $10K) that you don’t need for at least 3 years into the future

2. Invest it in a basket of stocks (aka Exchange Traded Funds aka “ETFs”) ★

3. Add $ to it regularly as you continue to make money, and...

4. Leave it alone (literally pretend the money isn’t there)

★ Jargon break: An ETF is a basket of stocks so you don’t have to pick stocks. Instead of buying one or all of the 500 stocks in the S&P (the US stock market everyone talks about which references the 500 largest US companies) you just buy one FUND that has exposure to all 500 companies! Essentially a multi-ingredient smoothie mix of different stocks)

>> Just feels risky, is it really worth it?

Risk and reward are correlated. The amount of risk you’re down to take is driven by your time horizon – how long before you need the money back in CASH for use. The longer you don’t need it → the longer you can ride out volatility (markets rising & falling) → the more risk you can handle → the higher your potential returns. Which is why you being young (far off from mortgage obligations or retirement!) is SOOO GOOD. Your ability to take risks (since you have time on your side to earn back any losses) usually brings higher returns.

Bottom line:
If investing makes you nauseous you can live a perfectly fine life without it. You’ll just have to save much harder to reach the same goal. WEALTH – the kind that allows you to travel anywhere you want for as long as you want, or that enables influential philanthropy for causes you care about (because let’s face it, the wealthier women are the better our world will be) – usually comes with investing.