Here Are The 5 Common Fears Of Investing In The Stock Market

When it comes to investing, the hardest part is often starting the journey. In the beginning, fear holds a lot of would-be investors back. They worry they may lose money or that they’ll choose the wrong investments. They may assume that, since they aren’t stock market experts, they simply couldn’t make smart choices. However, most investors discover that these initial fears were unfounded once they begin. If your fear is holding you back, here’s a look at five common fears of investing and how to overcome them.

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1. Losing Money – One of The Biggest Fears of Investing

Likely the biggest fear that any prospective investors may have is that they’ll lose all of their money. Usually, they assume they won’t make the right investment choices, causing their cash to evaporate because of bad moves.

While it is true that investing comes with risk, that doesn’t mean you can’t lessen it. For example, a diversified portfolio can better withstand market fluctuations, offering you a degree of protection against the unexpected. Starting with index funds can also reduce risk, as they have a level of innate diversification.

However, if losing money is your biggest fear, consider starting small. Educate yourself on the various options, particularly approaches that support faster diversification. Focus on a strategy that comes with an amount of risk you can stomach.

In time, you can always invest more. The slow and steady approach allows you to get your feet wet without having to put in a ton of money right away, which may allow you to grow more comfortable with time.

2. Choosing a Bad Investment

In a similar vein, some would-be investors worry that they’ll choose the wrong investments. This is especially true for anyone looking at individual stocks, as the degree of risk there is automatically higher than using a more diversified approach.

Ultimately, when it comes to choosing investments, research is your ally. If you review information from trusted, reputable sources, you can better gauge the quality of a potential investment move.

Additionally, it’s important to note that, even if you choose a bad investment, that isn’t necessarily the end of the world. You can always adjust your strategy, using the experience as a lesson that helps you make wiser choices moving forward.

Hint: one sign of a bad investment is when insiders start to sell their shares, or when you have the departure of key staff before earnings releases. Both of these can indicate that company insiders are jumping ship to avoid a deteriorating situation. Insider sales information is publicly available – you can check the SEC, websites that cover stocks like Yahoo Finance, or you can check a site like Insidertrades.com.

3. Market Volatility

There have been many events in recent history that show how volatile the market can be. COVID-19 is a solid example, as well as the crash during the Great Recession. Some may even remember the collapse of the Dot Com bubble. All of those events can be scary for investors, leading to significant losses seemingly overnight.

However, recovery typically flows a crash. The markets overcame the Dot Com collapse and the Great Recession. There’s positive headway after the initial COVID-19 losses as well, and some investments have even experienced gains throughout.

If you have long-term financial goals that involve investing, volatility isn’t something to fear. Usually, the market ebbs and flows, and a diverse portfolio can often weather the storms.

For those who have shorter-term goals, then market volatility isn’t necessarily a dealbreaker either. You may simply want to use a more conservative strategy. While less risk often means smaller gains, that could be a fair exchange in your eyes.

4. Whose Advice to Trust

Research is a critical part of the investment journey. However, figuring out which resources actually have your best interests in mind isn’t always easy. There are plenty of untrustworthy voices and even outright scams. For a would-be investor who hasn’t taken the leap yet, it can be anxiety-inducing.

If you have a lot of doubts, you can always start with a certified fee-only financial advisor. They don’t make money on commissions, so they aren’t being encouraged to recommend anything that’s not right for you.

It’s always wise to double-check any news or recommendations you spot. If you hear something from a resource you aren’t sure about, looking for additional information on the topic through reputable sources is a smart move. You can see if the details align, or if there’s another side of the story you need to consider. That way, your odds of being fully-informed go up, making it easier to make sound choices.

5. Not Having Enough Money to Get Started

Many people want to invest, but they worry they don’t have enough money available to get started. This is especially true for anyone who has researched opening accounts, only to find brokerages that expect large starting deposits.

While it’s true that some brokerages require you to start with a substantial sum, many don’t. In fact, some have no minimum starting balances, no minimum monthly contributions, and low fees.

Many robo-advisors have very low barriers to entry. Explore those options to see if any support the kinds of accounts you want or the investments you’d like to make. It can let you get started even if you don’t have a ton of cash available. Then, if you decide to open up an account elsewhere once you’ve generated the money, you can always do that.

Did you have to overcome any fears of investing before you started? Share your thoughts in the comments below.

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Tamila McDonald

Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.