Unpacking 3 mental hang-ups about investing
You may not be investing TODAY. But early mental hang-ups keep us from even wanting to get smart on it. Let's unpack these top mental baggage around investing and make sure you’re solid on some facts to keep in mind your whole life. Not everyone even in their 30’s, 40’s knows all this.
The top 3 investing hang-ups we've heard from you
Investing does NOT = stock picking, and does NOT = sexy & exciting. That’s a GOOD THING.
Investing in stocks = buying an index fund.
What is an index fund? A basket of stocks (remember: diversification) - so instead of buying individual stocks, you buy a fund that’s invested in lots of companies. Why? So if one company in the fund is doing badly, other companies should be doing well. It balances out risk.
Every smart investor will have a “portfolio” - a collection of companies whose prices don’t go up or down at the same time because they’re different from one another (industry, geography, size).
They want you to invest in what you understand.
If you understand what makes a retailer good, you invest in it. If you don’t understand what makes an aluminum company good (we sure don’t!), don’t invest in it.
Problem is, in the real world, few people are stock pickers. So, see #1!
Yes. Highs are higher, lows are lower in investing.
When stocks go up, this can 2x, 3x, or even 10x your money over 10 years - much more than you’d ever earn from just leaving your money in a savings account.
When stocks go down they can REALLY go down. In the 2008 “crash”, the value of your stocks could have decreased by 40% or 50% for a while.
But remember, that loss isn’t ‘real’. It’s just the (moment-in-time) worth of your investments. Money didn’t disappear. You only “lose” money when you sell your investment for cheaper than you bought it. Which brings us to…
Investing means to put your money somewhere and watch it grow. The key verb = 👁WATCH 👁 Don’t tap your investment to cash out for a big purchase. The way to make money is to use TIME as the main driver. Why? Even when markets or stocks “crash,” they usually recover within 5-10 years (and it’s never lost over a 25 year period). So, it’s a great bet for the money you’re investing for FUTURE YOU (not Next-Year You). Remember these 2 questions to ask yourself whether you have the money to invest.