Are You Afraid of Investing?

Monday, January 14th, 2013

Are you Afraid of Investing?

There are only three things you can do with your money; you can spend it, save it or invest it. While everyone spends money, only a few manage to save and even fewer invest, other than through KiwiSaver. Of those who save well and manage to accumulate a nest egg, there are a number who leave their funds in a savings account because they are too afraid to invest. In doing so, they are missing out on opportunities to improve their investment returns and increase their wealth. The key reasons why people are too afraid to invest are:

Fear of losing money. Bank deposits are perceived to be one of the safest forms of investing. However, bank interest rates provide a poor investment return when inflation and income tax are taken into account. Leaving your money in the bank can result in loss of purchasing power over the long term.

Insufficient knowledge about the alternatives. Investing is not as complicated as it may seem. To learn more about it, start by understanding your KiwiSaver fund. Read books about investing and get advice from a professional. Set up a small investment fund to become familiar with investing.

Fear of making the wrong decisions. Everyone, even experienced investors, makes occasional investment mistakes. Keep your investments simple, stay diversified to reduce risk, and get good advice.

Believing there is not enough time left to invest. Many people have the mistaken belief that their investment time frame ends on the day they retire. You can expect to live for twenty to thirty years in retirement and there will be at least a portion of your investment portfolio that will be invested for that entire time.

If you are afraid of investing, do something about whatever is holding you back and give it a go.

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