10 Things We All Hate About Investing in Stocks
The stock market has created an enormous amount of wealth over the years. On average, the S&P 500 - which consists of 500 of the largest U.S. publicly traded companies - has an average return of 8% to 12% per year.
However, the stock markets do not go up every year. There is volatility, ups and downs, and uncertainty at times. Although there are benefits to investing in stocks, here are 10 things we all hate about investing:
1) We know we need to invest. The biggest mistake would-be investors and savers make is not investing at all. Don't wait for that raise, inheritance or lottery win. Start today, right now, with whatever amount you have.
2) You have to have patience. Warren Buffett said this, “ the stock market is a device to transfer money from the impatient to the patient.” Patience is an important, but often underused investment skill. We’re not born patient, but it is necessary if you want to succeed as an investor.
3) There is homework you have to do first. Homework! Who the heck wants to do that? Well, most people invest in companies they like rather than actually understanding them. With stocks, there’s plenty of research and other information available out there. Never invest without a clue. There’s no reason to be uninformed.
4) I need to learn how to diversify. Investing in stocks involves what’s known as market risk: If the entire market tanks, your stocks probably will as well. You can reduce the risk in your stock holdings risk by investing in a slew of different companies. One easy way to get this type of diversification is to own mutual funds. A mutual fund allows you to own a slice of hundreds of companies - that's known as diversification.
5) Because investing in stocks are risky-right? Well, not necessarily. I’m sure many of you were around when the financial markets took a nose dive in 2008. How about last year when the impact of COVID-19 decimated world economies. The stock markets got crushed but it eventually came back up. And I mean way, way up. Record highs in fact! Although there are hiccups along the investment journey, the biggest risk is not investing at all.
6) You need a lot of money. You do not need a lot of money to start investing. In fact, you could start investing in the stock market with as little as $10, thanks to zero-fee brokerages and the magic of buying fractional shares. A great idea is to set up a brokerage account where monies are automatically transferred and deducted each month from a checking/savings account. Much like your 401(k) plan at work.
7) The stock markets are not a level playing field. There are at times a strong dislike toward Wall Street because of past scandals such as the: mortgage-backed securities fraud, the financial crisis of 2008-09, the Bernie Madoff Ponzi scheme and others. But the truth is, the stock market is not rigged but there are some real disadvantages that you will need to overcome to be a successful investor.
8) May have to reach out for qualified help. Investing isn’t rocket science but if you don’t have the time, patience, or simply no interest in learning about stocks, consider getting help. Seek out and interview at least 2-3 qualified financial advisors that you sense can help you before going at it alone. Investors who work with financial advisors are usually more successful than those that don’t.
9) Don’t know when to buy or when to sell stocks. Buy. Sell. Hold. Buying and selling stocks can sound exciting, complicated, and confusing all at once. The right time to buy a stock is when an investor feels confident that it will rise. The right time to sell a stock is when it reaches the price that you projected when you first purchased it. As mentioned above, you can have it professionally managed if you don’t want the responsibilities.
10) The FOMO (Fear-Of-Missing-Out). FOMO stems from the feeling that other investors are making money while you are left out. However, it leads to a lack of long-term perspective, an unwillingness to wait, too much confidence or too little confidence, and overly high expectations. Be careful because FOMO is basically about emotional trading, and if left unchecked, you may end up neglecting your trading plans.