When is the right time to begin investing in the stock market? What is your approach to investing? These question are often by investors as stocks are one of the most common investment plans that many people think about. The current economic meltdown and rising costs of living have forced investors to go a notch higher and consider diversifying their investments in order to secure their financial future. There are different types of stocks to buy and it is important for every investor to make an effort and understand what the industry is all about. Because of the volatile nature of stocks, a number of people are always afraid to put their money in stocks. Stocks prices fluctuate rapidly and are always affected by prevailing circumstances and other happenings in the market.
Reasons Why People Don't Invest In The Stock Market
The Risk Element
Taking risks in order to reap the rewards is often associated with stocks, only investors who can tolerate high levels of risk have been able to succeed in this industry. The fear of losing money is what drives away investors from the stock market. However, it is good to note that despite the challenges of the stock market, there is a high chance of making good returns especially if the right investment decisions are made. It's worth mentioning that the stock market is just like any other investments that come with their own risks and for your own success it would be beneficial for you to learn the buffett system of value investing.
Investment Mistakes
There will be obstacles in any kind of investments. The process of choosing the right company and stock to invest in scares away many people it is also one of the top reason why people don't want to invest in the stock market. The fear of committing mistakes as a beginner is one of the contributing factors why some investors prefer not to take the bold step to become stock investors. In order to overcome this fear, it is important for investors first and foremost, understand their level of risk tolerance. The problem is that a lot of people get into stock investment without first understanding how much risk they are willing to tolerate. This is a mistake because every negative trend or happening in the stock industry is a source of stress and frustration.
Lazy To Do Research
Investing in quality dividend stocks requires research time. Think about this for a moment: How much time do you spend researching and following up on your investments? Most people will spend more time researching their next car to buy, their next pair of sneakers, the best suit, the best dress, the best pasta sauce, etc. but these same people rarely spend more than 15 minutes a month researching their own stocks. I know of a person that spends hours clipping coupons (saving cents to a few dollars) but just minutes investing thousands in stocks.
Incorrect Information
A lot of theories have been put forward about stock investing in the topic of finding success in stocks. While some people find it to be a risky business that is not worth investing, others have had their financial fortunes turn around for the better thanks to stock investing. The best way to overcome fear associated with stock investing is to make sure that you are well-informed and have received the appropriate advice before investing. Some people get ill-advised and think that the stock market is a quick way to get rich only to be disappointed when stock prices decline and ended up choosing not to invest in the stock market for the rest of their life.
No Business Mind Set
This is not the case when it comes to investing in individual stocks. If you wish to win long-term on your investment, you got to treat it like a business, NOT A HOBBY. For example: A retail outfit can't make money if it doesn't have goods to sell, the same goes for investors, without cash, you can't invest. What do I mean? All investors need rules and you need to follow these rules or money WILL be LOST. If you lose your initial investment, you are out of business (just like the retail store). Therefore, think about the points to consider before investing your money, learn from your mistakes, fine-tuned your investment method and play it safe with a diversified equity portfolio.
Conclusion
Having the right information and understanding well in advance the risks associated with stock investing prepares you for the experience. The best way to deal with fear associated with stocks is to begin your investment with a small amount of money and educating yourself by learning the fundamentals of the stock market. Ideally, the amount of money you decide to invest should be EXTRA INCOME that is not meant of paying your monthly bills or any other crucial expenses such as medical and school fees. By investing in a small amount you are comfortable with, you are sure that in case anything goes wrong, you're still in a good financial position to cater for your other expenses.
