It’s normal to be concerned about risking your savings. But if fear of loss has you paralyzed, read this.
“No way, son. I worked hard for that money. I’m not about to gamble it away in the stock market.”
That was my dad, a child of the Great Depression and someone who, understandably, was reluctant to do anything with his money that didn’t involve either an insured CD or a T-bill backed by Uncle Sam.
Sound familiar? Maybe you know someone like him. Maybe it’s even you.
Humorist Will Rogers famously said, “I am more concerned with the return of my money than the return on my money.” Good logic, especially as one ages and becomes unable to rebuild a nest egg. But for anyone still working, sticking your neck out, even by a little, can make the difference between living large and barely scraping by when those golden years roll around.
Invest $100 a week for 40 years and earn 2 percent, and you’ll end up with a little over $200,000. Jack that rate of return to 10 percent, and you’ll have nearly $1 million. Think an extra $700,000 would make a difference in how, when and where you retire?
Of course, the only possible way to earn 10 percent on your savings is to take some risk by investing in things that might not work out.
While these types of earnings comparisons may be compelling, they’re probably old news to those unwilling to consider investment in real estate, stocks or other risk assets. So here’s another approach: a list of rules designed to help anyone minimize the fear of doing just about anything.
From investing in stocks to skydiving to asking someone out on a date, fear is not your friend. Here are seven universal principles that will help you keep it to a minimum.
1. Understand what you’re doing
If you’re going to invest in stocks, invest your time before investing a dime. Talk to people you know who have more experience. Learn what makes markets, and stocks, move up and down. Studying history will help you understand and predict the future. So will understanding the rules of the game. And one rule of this game is that stocks will go down as well as up.
There’s an inverse relationship between knowledge and fear. The more you have of the former, the less you’ll have of the latter.