Many people tell you that you shouldn’t park your finances in a low-interest savings account and that you should start investing so that your money won’t depreciate to nothing because of inflation.
But then, you get worried when you hear stories about people losing chunks of money in the stock market. What if you make the wrong investment? What if you lose it all and end up homeless??
I totally get it. I come from a family who thinks that the stock market is of the devil and that anyone who invests in it would end up on the streets eating out of rubbish bins.
Okay, that’s an exaggeration, but yes, my parents are not big fans of investing in the stock market. When I mention investment options like REITs, ETFs and even unit trusts, they would wrinkle their noses in disgust and say they’d much rather put their money in fixed deposits.
Why I’m (still) scared to invest my money
This is my long-winded way of saying that my parents didn’t teach me how to invest beyond dumping money into fixed deposits and property. Instead, I learned to fear investing in the stock market.
I don’t blame my parents, mind you. They come from families who struggled for every penny and the thought of losing even one sen terrified them. And while I may lack in investment education, I certainly learned a lot about managing my money wisely from them.
However, when I started my journey to sort out my finances, I knew that investing was a very important thing to do, and that I should do it early.
But fear and analysis paralysis caused me to drag my feet. (That, and having not much disposable income due to low pay and high debts). I only started investing in stocks in my early 30s, and I did what most people did: I invested in unit trusts. Back then, I had no idea where to even begin searching for investment tips. So, I thought, well, let me rely on unit trust advisor to guide the way.
Over the years, I started to learn more and more about investing, but I was still scared. There was a time when the stock market dipped massively (I think it was around 2008), and I was freaking out. I called my fund manager, fully intending to shift all my money out. That’s when she told me: “Now’s a really bad time to move your investments out. Instead, this a good time to buy more!”
That’s was when I realised that not only are you supposed to invest for the long haul, but you need the mental discipline and fortitude to stick it out.
Fortunately, I listened to her and continued to dollar cost average (invest monthly).
Overcoming the fear of investing
So if you’re totally clueless and afraid of investing, I get you. Investing is scary in a bull market. It’s especially terrifying in a bear market! (Yet, that’s when you can nab cheap stocks if you do it right.) But there are some of the strategies I use, and you can use, to overcome the fear of investing:
1. Start educating yourself
For Malaysians, it can be tough to gain a solid financial education because there’s a serious lack of Malaysian-oriented personal finance resources. Most of us make do with Western-oriented finance resources and books but then get totally lost when they start talking about investing. Roth IRA? Vanguard? Index funds? What the heck are they?
Luckily, there are more Malaysian-based resources right now, but weeding out snake-oil advice from healthy, solid financial tips can be challenging for a newbie.
Here’s a tip: First, learn the basics of investing from non-biased, official sources such as Bursa Malaysia Marketplace. It’s a great educational portal for beginner, intermediate and advanced investors. There are also free Coursera sources on financial markets that can you can tap into. These sites will tell you about the basics about investing, the markets etc, without clouding it with their agenda or investing strategies.
Then, learn about the different investment vehicles out there, such as ETFs, unit trusts, bond funds and REITs. Learn how each instrument work, the risk factors and the difference between each vehicle. Once you’ve gained solid understanding about investing, you’d be able to evaluate more out-of-the-box investing strategies and vehicles logically.
2. Respect your risk tolerance
I’m a pretty conservative investor, so I know that I can’t heavily invest in risky vehicles or I’ll lose sleep. If I want to explore riskier options such as P2P lending, I’ll probably put in an amount I can feel comfortable to lose. Don’t just follow what investment gurus or random folks on the Internet (like me!) who say that you should invest in this or that. Instead, ask yourself: Can you handle the risk of investing money into a particular investment vehicle? If the answer is no, either skip it entirely or …
3. Start small
When I first heard about StashAway, the robo advisor, I was curious, like many personal finance enthusiasts in Malaysia.
After reading as much as I could about it and attending several seminars, I decided to try it out. I started small — with RM500.
Fortunately, StashAway doesn’t have a minimum investment amount, so you can even start investing from as low as RM10 if you like. But the idea is to start with a manageable amount so that if the investment falls, you won’t feel the loss as keenly. Slowly, as you get used to the ups and downs of the market, you can increase the amount based on your level of tolerance.
4.Don’t time the market. That way is the path to stress.
There are some channels out there that teach you how to time the market. Listen, even investment guru Warren Buffet says that it is impossible to time the market.
A more solid investment strategy is to consistently invest at regular intervals, and in a small amounts (dollar cost averaging). That way you can weather the highs and lows of the stock market.
5. Check periodically but not all the time.
It’s good practice track your investment regularly. But don’t check it every single day – the unpredictable movements of the market could wear you out! Instead, I will recommend that you check your accounts at the end of each month to see how they’re doing. Remember, you’re in it for the long haul. Investing is for the long term, not just for one to two years, but up to decades, so do be patient even if there are dips and crashes in the market.
If you have any more tips on how to get over your fear of investment, do share in the comments below!
Elizabeth Tai 