Many millennials are hesitant about investing, often believing they don’t have enough money to get started. This is a common misunderstanding because you don’t actually need large amounts of cash to begin investing. With a well-thought-out budget, many people can afford to invest.
Another big hurdle is fear. Many people think investing is like gambling or worry they’ll lose all their money in the stock market due to its risks. However, avoiding investment can hurt your financial future since investing is a proven way to build wealth and let your money grow over time.
To overcome this fear and make sure you’re not missing out on savings opportunities, here are four steps you can take:
1. **Understand the Market**: Don’t be afraid of what you don’t know. Spend some time researching and learning about how the market works. Historical data over more than 100 years shows that while the market does have ups and downs, it tends to recover over time. So, don’t panic and sell during a downturn, as that can lead to losses instead of gains.
2. **Diversify Your Investments**: Don’t put all your eggs in one basket. Diversifying your investments by spreading them across different assets is a safer approach. Consider various retirement accounts like 401(k)s and Roth IRAs, and include a mix of stocks and bonds to balance risk.
3. **Think About the Risks of Not Investing**: Instead of focusing only on the potential losses from investing, consider the risks of not investing at all. Without investing, you might struggle to build a financial safety net for your future. Investing is key to long-term wealth because it lets your money grow through compound interest.
4. **Start Small**: To ease the fear of investing, begin with smaller, low-risk investments. You can start with as little as $5 using platforms like Stockpile. While this won’t fund your retirement immediately, it helps you get comfortable with investing and learning about compound interest firsthand.
These steps are drawn from personal experience. When I started, I could only save $100 a month. I saw it as my small step towards financial independence. It was rewarding to watch my portfolio grow over time, even with some market ups and downs.
Investing can yield average returns between 4% and 12%, which is much better than typical savings accounts. Overcoming your fears and starting to invest is definitely worthwhile.