Investing: It’s Not as Scary as It Seems
By: Lance Zasso
Ralph from Wreck-It Ralph. Sully from Monsters Inc. Fezzik from The Princess Bride. What do all of these characters have in common? How in the world do they relate to investing? Well, each one of them appeared to be intimidating and aggressive figures when in actuality, they were quite the opposite. Others formed misconceptions about them based on their hulking appearances, leading to skewed views of their true identities.
I believe this can also be the case with investing. Whether through firsthand experiences or examining the efforts of peers, many people can easily become overwhelmed by the investment process. While there most definitely exists some complexity and sophistication, here are three basic elements to remember when considering investing that will relieve common anxieties and remove some prevalent fallacies people have about investments:
#1 Time is Your Most Valuable Asset – Unfortunately, time is also your most fleeting asset. It is vital to invest as soon as possible, in order to take full advantage of a concept known as “compound interest.” This represents the accrual of interest on both the initial amount you invest and any previously accumulated interest. As a general rule, the earlier you invest, the earlier you will start compounding that contribution. Roth IRA’s, index funds, and money market accounts are a few examples of potential low-risk options to either start with or add to your portfolio.
#2 Be the Expert – Gaining advice from professionals in the industry usually yields positive results and is highly recommended, but individuals should also seek to become knowledgeable about the field themselves. Many large corporations, like Fidelity and Charles Schwab, offer free resources on their websites, but you can also utilize apps such as E*TRADE and Merrill Edge. The important thing is to dedicate time and put forth the effort to know what the best options are for you based on your specific constraints and needs. Being informed is one of the most beneficial things you can do before you invest.
#3 Trust the Process – This phrase famously coined by the Philadelphia 76ers basketball team rings true for investing as well. Get-rich-quick schemes may succeed occasionally, but the risks and potential repercussions are immense. The safer and more stable route comes through investing in long-term items that provide much more certainty. Even these types of investments may underperform, but it is vital to ride it out and not become emotional. Making irrational decisions based on market movements remains one of the biggest dangers in investing, so staying apprised of but not becoming consumed with your investments’ status can go a long way.
Do you have questions about your finances? Consider meeting with a Peer Financial Coach from the Center for Financial Literacy. They would love to provide guidance on topics such as budgeting, investing, saving, and much more. Book a session!
