The popular saying of Warren Buffet says “Never depend on a single income, make an investment to create a second source. This are the words of a popular business magnate, inspiring I guess. But then with this motivational speech, why are people still scared to invest and create a second source of income? Before delving deep, I’ll like to defined what it means to invest.
What is Investing?
Investing, broadly, is putting money to work for a period of time in a project or undertaking in order to generate positive returns (i.e., profits that exceed the amount of the initial investment). It is the act of allocating resources, usually capital (i.e., money), with the expectation of generating an income, profit, or gains.
One can invest in many types of endeavors (either directly or indirectly) such as using money to start a business, or in assets such as purchasing real estate in hopes of generating rental income and/or reselling it later at a higher price.
Investing differs from saving that the money used is put to work, meaning that there are some risk that the related project(s) may fail, resulting in a loss of money.
Investing has its positive side and its negative side to it, there is usually a fear factor and some form of risk in venturing into a new business. This is a reason most organizations or individuals need to have a risk appetite before venturing into an investment.
Investing can cause valid and genuine fears for new investors. Even experienced investors can become scared at times. People make bad decisions, get carried away by emotions, and lose money because of situations outside of their control. If you’ve just started investing, you’re getting into something new and unknown.
Why do people fear investing? Why do people think investing is risky?
If you are one of the people that are always hesitant to invest, you probably have what is called “Investophobia”.
Yes, I just said that ! INVESTOPHOBIA!
But no need to panic. It’s not some deadly disease. It is the fear of investing.
Like every other phobia, it has a root cause, and we have several recommendations to help you overcome it.
Life can be risky. Buying a home, going back to school, changing careers, they’re all risky but may pay off for you in the long run. Investing is no different. Risk might sound scary, but can be an important element of investing—and may be the reason why your money grows over time.
The risk factor is the main reason why many people avoid investing in any form of business. Investors fear that their investments will get affected by market fluctuations and other economic factors and may lose all their money. In fact, many investors do not even know how to invest or what kind of risks they need to take into consideration while making an investment decision.
Another reason why people are hesitant to invest is because of past records. Some investors have lost money when they invested in mutual funds that had high returns. But they went bankrupt later on due to poor management or bad decisions by stockbrokers. These stockbrokers must have misguided the investors into buying some stocks without properly explaining to them its features and benefits as well as possible drawbacks.
Lack of knowledge is another reason why many people hesitate to invest. For beginners, investing seems like a complex process. This may be due to the fact that investors have little or no knowledge of how a particular investment thrives or what benefits they offer. Most investments require a certain level of expertise and knowledge about financial markets and economics and investors need to get a little guidance about it to begin with.
Here are 3 Ways I Overcame my Fear of Investing
The following are some practical steps I used to get over my fear of investing money; if you are looking to get rid of this fear too, here are some places you can start:
1. Educate yourself
Knowledge is an essential asset when you’re investing. Understanding how the markets and stocks work can help alleviate investor fear. You can also reduce anxiety by becoming more familiar with the economy, investors, businesses, and government influences on the market.
2. Start small, keep contributing, let it grow
Don’t be afraid to start small. Begin with a sum of money that you can afford to lose and not risk too much while learning. Another funny thing is , can we really afford to lose money ? But it’s all risk and a bold step to start small. As you watch your balance grow, you’ll become more comfortable investing more considerable sum if you can afford to.
- Leveraging and compounding interest is one basic principle behind a good investment
3. Analyze your risk tolerance
Analyzing your risk tolerance is important. It helps to determine how much you’re comfortable losing, and then tailor your approach accordingly.
Conclusion
In a nutshell, rather than stay on the side of fear, i would say , allay your fears on the myths behind investment. Acquaint yourself properly with the right information on whatever investment you choose to delve into. Remember the law of compounding interest and patience is a virtue, as they say—it is even more so when investing.
Finance Buddy 
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