Get Over Your Fear of Stock Markets explained by professional forex trading experts the “ForexSQ” FX trading team.
How to Get Over Your Fear of Stock Markets
About half of Americans (52 percent) say they currently have money in the stock market, according to Gallup. That may sound good, but it’s the lowest ownership rate in nearly two decades. And millennials are particularly market-averse, with a Bankrate survey finding that just one-third of Americans aged 18-35 have their money invested in the markets.
What’s behind the slide? Among other things, fear:
Fear of the political climate.
Fear that that stocks have soared too high, and that markets will eventually correct.
Fear that, as an individual investor, there’s simply no competing with the pros.
Add them all up, and you’re really talking about one big fear: Fear of losing money.
The problem is, if you don’t invest, you’re losing money anyway! If you’re stuffing your money into a bank savings or money market account, you’re getting about 0.5% interest; a 2-year CD might get you annual returns around 1.3%. Either way, it’s not enough to keep pace inflation and taxes: The purchasing power of your socked away money will be worth less next year than it is this year, and even less the year after that.
That’s why this is one fear it literally pays to overcome. Here are a few suggestions on how to get over your fear and start seeing some real returns.
Put your money in little by little, and don’t check on it too much.
Say you invested $100, and the next day you lost $4.
It’s a letdown. Then, the next day, you gain $4.30. The gain of 30 more cents doesn’t compensate for the feeling of losing the original $4. That’s a phenomenon called “loss aversion,” which behavioral finance experts have documented to show that humans hate losing more than we enjoy gaining (twice as much, in fact.) For that reason, it’s important to remember that the market experiences ups and downs, good and bad days.
If you look too much at your losses and gains, it could discourage you.
There are a few ways to avoid getting discouraged by losses. Mark your calendar to check in on your portfolio once every quarter or six months. Besides that, keep calm, carry on, and trust in the historical long-term gains of the market. And take the plunge little by little — this is called dollar-cost averaging. If you had $1,000 to invest, by this strategy, you’d invest $100 every week for 10 weeks, instead of $1,000 all at once (you can also do it on a monthly basis). This way, you wouldn’t constantly be comparing the stock’s current value with the value it had on the one day you bought it. “You won’t have that specific number in mind, so you won’t feel as bad,” says Duke University Professor Dan Ariely, author of Payoff.
Consider the cost of waiting.
“There’s never a good day to say, ‘Let me go in [to the markets] today,’” says Ariely. “So [if we put it off], we never go in.” That has a huge cost.
Think about it this way: Consider the cost of not investing. Say you invest $500 a month from the time you’re 30 years old until retirement at age 65. If the money grows at an average 8% return (tax-deferred), you’ll have a $1.15 million stash.
But if you wait until you’re 40 to get started? You’re looking at less that half that amount — $479,000. (And, if you’d been smart enough to start at 25, well, hats off: That extra 5 years brings your total to $1.8 million.)
So the longer people put off the “someday” they’ll finally start, the more they’ll have to contribute later to catch up. “Every dollar you earn through your investments is a dollar you won’t have to earn at your job later on,” says millennial money expert Stefanie O’Connell, author of The Broke and Beautiful Life.
Take the easy way in.
Investing isn’t reserved for “market wizards” who know how to pick and trade individual stocks, says O’Connell. For most people, succeeding is a matter of putting as much as you can into your retirement accounts on a regular basis, then putting that money to work in a diversified portfolio.
You can get diversified by putting your money into a combination of a total stock market index fund and a total bond market index fund, with the ratio of bond holdings increasing as you get closer to retirement. Alternatively, you can go with a target-date retirement fund, which re-allocates your investment dollars for you as time goes on; just pick a fund with a target date close to when you think you’ll retire. You can also opt for a managed account offered by your brokerage firm or retirement account provider, or a robo-advisor like Wealthfront or Betterment, which will put you into a mix of investments based on how you answer a few questions about your goals.
Think about the end result.
Finally, to get yourself excited, picture what you’re growing your money for. It’s one thing to think “retirement,” but it’s another to think of the place you’ll live when you’re retired. It’s one thing to think about sending your children to “college,” but another entirely to visualize them hanging out on the quad at your beloved alma mater. The idea is that no matter what your future goals are, the more tangible you can make them, the more appealing investing to make them happen will be.
Get Over Your Fear of Stock Markets Conclusion
For more information about currency trading brokers visit TopForexBrokers.com forex brokers comparison website, Tip ForexSQ.com foreign exchange trading experts please by share this article about Get Over Your Fear of Stock Markets.