I often receive this question and I often read about it being asked:
Why and where should I invest?
Pondering this question, I came to realize that the question is not about investing per se but about another thing. And it about:
Indeed, humans act not by what logic tells them but what their emotions compel them to do. In this case, it is their emotions too that immobilize them not to act or to invest (for that matter), mainly because they are scared of the risk it entails.
The Investment Taboos
The scare freeze I am talking is often drawn from some prejudice and misconception that were heard about investment. Based from my experience, here are the most common fallacies about investing that instigate fear:
I can’t enjoy the fruits of my labor
Some people have this mindset of YOLO (You Only Live Once). They thought the main reason why they are working is for them to enjoy their money, NOW. For them, there is a sense of entitlement that compels them to spend now because they deserve it, because they work hard for it. Certainly, their “NOW” self will be thankful, but how about their “FUTURE” self?
It is complicated and it for the elites
There are people who, when they see numbers, they feel intimidated. This same goes for investing. Some people thought that investing is for those who can understand numbers… which I don’t understand because investing, in the most basic sense, is about money. And money is something that we all have. If we follow the logic, investing should be for all because it is for those with money, which is basically all of us.
Investing is gambling
This is common for people who are recently invited to be exposed in the world of investing. They associate the win or lose concept with investing mainly because they see the money being invested are “bet.” In some degree, investing is a gamble because like any other thing in this world, the result of investment cannot be 100% predicted (unless it is a scam!) But the beauty in investing comes also from this very truth: though it cannot be predicted 100%, it can be managed and there are many ways and means that are (freely) available to help you do that.
If you notice by now, the misconceptions above are either lack of information or twist of truth about investing, and there is no better cure for that than this:
When I was new in the world of investment, the very first concept I learned is this:
An investment instrument entails its own level of risk
A bond, for example, entails a relatively low risk because the certainty that your money will be back (with interest) has a higher chance because they are coming from reputable institutions like blue chip companies or government. The stocks, however, has a higher risk because it is based on a market that can be very volatile and no one can be 100% sure if it will be up or down tomorrow, thus, the return of your money.
Based from this concept, they said that the main factor that determines the right investment for a person is his risk appetite. If the person is risk averse, then he might settle for bonds. But if he is willing to “gamble” and wants to have a flavor of excitement and risk, then he might as well buy some stocks.
For the longest time I believe this concept… until I read a book written by Kim Kiyosaki that said a profound line about risk and investment:
The risk of investment is not dependent on the investment instrument but on the person investing
Kim said that all investment instruments have the same level of high risk if the person does not know (or has very little knowledge of) the investment instrument the person is engaging to. The danger lies on the unknown path. Thus, continuous learning on investment is the most concrete way to extinguish risk.
It is by learning continuously that:
- makes investment less overwhelming (especially if you are not a number person to begin with). In your journey to learning, you will discover some great materials that make investment easier for layman like us, not to mention the tools which are meant to make us love investing too!
- reduces the uncertainty of investment and therefore help you manage the unpredictability of investment instrument. You will meet experts that will share their ideas and insights. Sometimes, they’ll also share their mistakes which we can learn from.
- you’ll discover the possibilities of your investment, making you strive more and earn more. Noting beats the feeling of discovering a way to grow your investment!
I hope that the points above will encourage you to invest and discover the exciting world of investment. Because a dream girl is (or striving to be) financially free, and there is no better way to be one than to invest!
To a financially free you,