5 Common Excuses for not Investing
vemuda.com - Every day, hundreds and thousands of new investors enter the market, hoping to become the next Warren Buffett. However, there are still many people who shy away from investing and the stock market.
In today’s post, I will tell you the five common excuses that I’ve heard from people.on why they have not started investing yet. Maybe that person is also you.
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If you want to find out what these excuses are and also learn how to start investing, then stick around because I think you might enjoy this post.
After all, investing is one of the most rewarding career choices out there. It’s also one of the best ways to grow your wealth or attain financial freedom.
So, don’t let silly excuse hold you back. Here are the five most common fears and excuses that I hear people say all the time, on why they have not started investing.
The number one excuse that I hear which hold most back from investing is that they say that they just don’t know where to start.
Investing might seem overwhelming and in-fact a little scary if you are on the outside. I can relate because I wasn’t always an investor, actually, I was a little sceptical about it.
I’m sure you have all heard stories of people who lost everything gambling on the stock market, which is actually quite scary and can in fact happen.
That’s why if you are just getting started with investing, especially in the stock market, make sure you do a lot of research first.
There was a time in my life where I used to look at my dad and my friends who were investing and I used to wonder how they do it.
Then once, I took the first step to become an investor, the rest of it was very simple and followed naturally. If you are just getting started, I would advise you to follow these 3-step before investing.
First, get rid of any high interest-bearing debt if you have debt. And if you owe money especially on your credit card at very high-interest rates, the best thing that you can do for yourself is to get rid of that debt. Paying interest every month can be very crippling and it’s better to stay far away from it.
The second thing to do is to open an online brokerage account. It doesn’t take a lot of money to open trading accounts these days. In fact, I believe it is completely free and you just have to keep an initial deposit or minimum investment in it.
The third step in the plan is to create a watch-list of great companies. Start off with companies whose business model you are familiar with. If you are a tech expert, start off with the technology sector and identify the best investments there. Warren Buffet describes this as finding your “circle of competence”.
They can be companies whose products you use, an industry you work in or are otherwise familiar with. These should be solid companies with more than 10 years of good performance.
Warren Buffet also particularly looks at how competent the management is and how honest they are in their dealings.
He says that if you want to judge the performance of any company in the next 10 years, all you have to ensure is that the company is operating in a booming industry and that the management is competent enough to make critical decisions.
After you have identified good companies, add them to your watch-list and then wait for them to go on a sale during a stock market crash, or when the stock is underpriced. That is the time you should buy them!
The second most common excuse that I hear people make is that they say they will lose all their money.
Well, if you know how the game works, you wont say that. Warren Buffet has made his fortune on the stock market and he has two rules of investing.
Rule number one is that make sure you don’t lose any money. He says never to buy a stock if it’s already too overpriced in the market.
Always ensure that you have a decent ‘margin of safety’, so that you can actually protect your invested capital.
Margin of safety works on the principle that you have bought a certain share on such a low price that the probability of it increasing in value is now higher than the probability of it falling further.
Warren Buffets second rule is; do not forget rule number 1. He has made a fortune using this system in which he makes a watch-list for himself and then waits till the stock prices of these shares go way down.
If you buy companies that go on sale, it is highly likely that they will be worth more in a couple of years.
Prices in the market will go up and down, but you should be smart enough to hold onto your stocks during these price swings.
Ultimately, the long-term direction of most companies is up and so you won’t lose money unless you sell the stocks at a price below what you paid.
You are almost certain to make money if you buy great companies at discounted prices and hold them for 10 years. Investing is that simple. If you are invested in a good company, all you got to do is to wait.
Charlie Monger said that we do not make money when we buy the company and we do not make money when we sell the company. We make money when we wait.
So, do not get scared if the market is not doing well and your company’s stock price has just dropped.
This is where people make their losses simply because they cannot seem to wait for prices to go back up.
The third common excuse that I hear is that the stock market is going to crash.
Well, although there have been a couple stock market crashes over the years, the market always recovers and bounces back. The stock market is one of the greatest investment opportunities that you will ever get.
Rich investors like Warren Buffet and most investors wait for the stock market to crash, they actually see it a great opportunity to buy great company stocks for very cheap.
Sometimes in a market crash, you can buy a company at literally a 50% discount. You hold the company and wait for the crash to get over and your company price doubles.
Assuming it takes 3 years for that to happen, this will mean a 26.67% return for you. And let me tell you that this is a pretty sweet return.
So next time, while everyone is panicking and dumping their stocks in the market, you will know better. Stay on the sidelines and watch like a predator. Be like the cheetah stalking its prey.
Once the company is below 30 or 40% of its market price, you start buying the stock incrementally and go for the kill.
The Fourth common excuse that people have is that they say they just do not have time.
Well, investing is the only career choice in which you do not need to work hard. All you have to do is to work smart and make correct investment decisions from time to time.
Your money and wealth will start to grow automatically. This is one of the fallacies of investing. If you are doing it right, it does not take that much time.
Once you have got your watch-list set up, we are talking about 15 minutes a week at most to manage your portfolio. Anybody can find 15 minutes a week to secure their financial future.
I really do not care how busy you are. I am sure you can spare 15 minutes for something that will help you achieve your goals.
The final excuse that I hear is that people say “I am not good with numbers”.
Well, you do not need to use rocket science to invest. Investing is rather simple once you get the hang of it.
Nowadays, you have financial calculators online to help you calculate how much you need to invest at a certain rate of compound to get your desired money goals and have a fantastic retirement.
You are also currently living in the informational and digital age which means you don’t have to wait 3 or 4 days for your company-related news to reach you.
All of it is available including the latest headlines at the click of a button. But if still you feel queasy while investing, then subscribe to some analyst reports that keep you informed about the future outlook of your company.
You can read economic surveys and reports on the internet which will tell you how the economy is currently doing.
You can even follow some investors on their social media and get an inside scoop of what they are invested into.
Mutual fund reports are also available online in which you can explore the common stocks being invested into by the larger mutual funds. All you got to do is to emulate their strategies at the minimum. If you think you can do better, you can always go for that active portfolio strategy instead.
Again, what does this prove to us? Investing is simple. All you have to do is to get rid of your fears and excuses and get started. Franklin D. Roosevelt once said, “there is nothing to fear than fear itself”.
Nothing is stopping you from investing and seizing opportunities today. Overthinking and fear are your worst enemies.
They will paralyze you into inaction so much so that it will cause you a lot of anxiety and depression.
Investing is one of the few opportunities that you will have in your life to grow your wealth and achieve financial freedom.
All you need to do is to follow a solid strategy. Just start researching about companies and the industries that they are operating in.
Know your circle of competence as Warren Buffet puts it. Research about companies whose business models you know well or have experience with.
If you choose a completely different industry, your chances of success can quickly diminish..Make a final watch-list of the companies that look solid and financially stable to you.
Wait for buying opportunities that you will get to invest in those companies. When those really good companies go on sale; that’s when you become the predator and start scooping up their stock from the market. Be very patient when you invest.
Yes, you will be faced with times that despite buying the stocks at what seemed to be their lowest points, they might fall even more.
Price volatilities are a common feature of the stock market. Shrewd investors know better than to worry about such market fluctuations.
They will usually have a stack of cash on the sidelines just for this purpose as they will invest each time the market drops.
Keep your eye on the long term. Warren Buffet says that even if the stock market closes for 5 years, he does not need to panic because he is a long-term investor.
So in conclusion, these are the time-tested ways to succeed in the market. They have been effective from the time of Benjamin Graham all the way till now.
If you want to know more about investing, watch some of our other posts.
Thank you so much for reading. With that said, I’ll see you in the next one.