You know you need to invest.
It’s time to get off your assets and put them to work.
Unfortunately, there are a lot of myths surrounding investing. It’s easy to be intimidated by investing when you think about the jargon and you’re concerned about what the stock market is doing.
Before you assume that investing just isn’t for you, get the full story. Here are five investing myths keeping you from leveling up with your money:
1. I need a lot of money to get started.
It’s a good thing this is bullshit. You can totally invest even when you’re broke AF.
First, you can open an investment account with many brokers with $0. Many brokers will let you invest between $50 and $100 a month if you sign up for an automatic investing account.
There are even startups, like Acorns, that allow you to invest your pocket change. Use dollar-cost averaging to start investing consistently. Eventually, you’ll want to boost the amount you invest each month. But the important thing is to start investing early.
2. I don’t have enough assets to get help investing.
Many of us feel more comfortable when we have someone to help us make investing choices. Sadly, there are money managers that do require you to have a lot of assets before they will even look at you.
But that doesn’t mean you’re out of luck.
Thinking that you need a human person dedicated to your investment management is one of the biggest investing myths. Get over it and embrace the technology available to us.
The rise of robo-advisors can be a great help to anyone with few assets and a desire for a little direction. You won’t get personalized help from robo-advisors, but you will get an idea of how to start, and someone else to guide you.
If you want a little more personalized direction, but don’t have the asset count for someone to straight manage things for you, consider a fee-only financial planner. At the very least, one of these folks will help you create a map for the future for a flat fee.
3. I need to understand how to pick stocks.
Honestly, you shouldn’t go anywhere near stock picking until you have a little experience with investing.
When you start investing, it makes more sense to start with index mutual funds and ETFs. These are groups of investments that have something in common. Personally, I prefer all-market index funds that follow everything publicly traded on U.S. exchanges. I also like S&P 500 funds because they offer access to a wide swath of the market.
Index funds and ETFs allow you take advantage of overall market performance rather than relying on your ability to get it right with a few individual stocks. Over time, the market generally goes up; it’s never gone negative in any 25-year period.
Start with funds. Learn a little. Get your feet wet. If you still want to pick stocks later, use not-for-retirement money to experiment.
4. I have to know how to “win.”
Do you have a competitive nature? If so, you might be tempted to think that you have to beat the market.
While it’s fun to think you can outperform the market, it’s foolhardy to focus on such a goal. Investing myths lead you to believe that it’s not worth it unless you’re “winning” against someone.
The truth is that you don’t need to be better than anyone. You just need to focus on your own goals. Stop worrying about how your friends invest. Don’t tie your self-worth to whether or not your portfolio does better than the market.
You don’t need a portfolio that’s bigger than someone else’s.
What you need is a plan to meet your personal financial goals.
Rather than obsessing over whether or not you are “winning,” look at whether or not you are going to hit your personal milestones. Perform a retirement assessment. How much do you need to retire? How much should you set aside (perhaps in index funds!) each month to reach that goal?
As long as you are on track to meet your goals, it doesn’t matter whether you beat the market — or your co-worker — at investing.
The worst thing you can do in any financial situation is compare yourself to others. Compare yourself to you and move forward.
5. I’m going to lose everything if the market crashes.
We all remember the market crash of 2008 and 2009.
It’s one of the reasons many of us are afraid to invest today. One of the most persistent investing myths is that you will lose everything during a market crash.
Do you know what I did when things looked ugly at the beginning of 2009?
I bought more shares of my favorite index funds.
For the most part, you only lock in your losses when you sell low. I stayed the course during the last couple of market events and even added to my portfolio. You get more bang for your buck when you buy during the dips.
While you’re young, you can afford to let it ride when you go through these crashes. As you get closer to retirement, you can consider moving some of your assets out of stocks and into bonds and/or cash. That way, your portfolio is somewhat protected close to the time you will actually need to start using that money.
But, for now, chances are that you can get through whatever the market throws at you.
There will always be down markets, bear markets, and crashes. Don’t react with panic and unload when you will guarantee losses.
Bottom line: investing is your best bet.
If you want to build long-term wealth, you need to get over the investing myths. Investing is your best bet for building financial independence in the future.