When you mention the word “investing” to most people, more specifically, investing in the stock market, reactions of caution and fear often arise.
Here are the commonly heard examples coming from relatives or friends
1. I lost half my savings when the stock market crashed.
2. Every time I buy a stock, it seems to go down.
3. I should have kept my money in the bank instead.
4. Investing is risky, you can lose your capital.
5. Buying stocks is like gambling.
This aversion to investing is compounded by the fact that we were taught by finance courses, banks and financial advisors that high risk leads to high return.
In order to earn high returns, you must be a risk taker! And since most people don’t like the idea of taking big risks, they never ever aspire to achieve high returns with their money. As a result of past painful experiences and well-intentioned advice from ignorant friends, many people have developed a phobia for investing.
They believe that investing is too risky and it’s safer to keep my money in the bank. And so they resign themselves to earning measly returns of 2%-3% from their fixed deposit accounts.
Consequently, they have lost out on one of the most powerful wealth building tools available, and the opportunity to retire young and wealthy. What’s worse is that by not investing, these people actually experience the devaluation of their hard earned savings from the effects of inflation.
Thinking they have saved enough money to retire comfortably after twenty years of hard work, they realize too late that everything around them has doubled or even tripled in price!
A good example to prove this is the $9 movie ticket that used to cost $3 in the 1980s. Inflation will almost guarantee that you will be paying more than $27 to watch a movie twenty-five years from now. Similarly, maintaining your home and a car would cost three times more than it costs today.
Is your money growing as fast as prices are rising? By not learning how to invest, it is almost certain that you will end up struggling financially in your twilight years. That is what I call truly risky! In truth, not investing can really be classified as high risk and no return.
Investing is only risky when you have not acquired and developed the necessary skills and competency needed for you to make investing decisions. This is similar to scaling a mountain without learning the techniques needed that will enable you to climb to the top.
Starting from today, learn and acquire the necessary skills and competencies needed to invest wisely for profit!