We all know that investing is critical for building wealth over time. But investing our hard-earned money is often easier said than done.
Investing requires many skills and thought processes that may not come naturally to people. It requires the ability to be strictly analytical despite the fact that your financial future may hang in the balance of each decision.
Because of this, investing can be a challenge, but it doesn’t have to be. Below, we’ll look at the top 5 reasons investing can be challenging.
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This is probably the biggest fear for most new investors. If they haven’t followed financial markets for long, they most likely only hear about the markets when there’s been some sort of newsworthy drop in a major index.
This can make financial markets seem as though they are no better than gambling and they can drop at any moment, causing big losses.
Of course, market volatility is real, but those with experience understand many of these drops are natural motions of the market.
To combat this, investors need a longer timeline to let their investments grow. The longer you invest, the more the volatility evens out and you end up with sustained growth over time.
When you first decide to start investing, the number of choices can seem overwhelming. There are stocks, options, foreign markets, funds, and so many other investments. Not to mention the different trades that can be made in each area of investing.
But while so many choices seem overwhelming, it’s actually a good thing. This allows investors to focus on areas that work for their investment planning strategy as well as diversify their portfolio.
A skilled financial planner or wealth management expert can take advantage of these different investment options and create a well-diversified portfolio that works for the client’s long-term goals.
This is one of the flaws that those new to investing often make, but it also can affect those with experience as well.
Emotional investing can happen for different reasons. Sometimes fear drives you to make bad investments, but also hope and optimism can do the same.
This is why it’s critical to stay completely analytical and not to let your emotions or feelings toward the investment get in the way of your decisions.
Finding Reliable Information
In the digital age, we are bombarded with information and it’s hard to decipher what can be trusted and what is false or misleading.
Investments are no different and there are countless bad sources of information that can fool people into making bad investments. Sometimes it’s simply because the source has no knowledge or experience, while other times they may be trying to intentionally trick you.
Either way, you need to always be curating your sources of information so you can build a reliable list of trustworthy investing resources.
All investing carries some risk. The goal is to manage that risk in a way that fits your goals and risk tolerance.
If you try to avoid all risks, you’ll likely never grow your wealth enough to make it worth the effort. So managing risk to balance your growth targets and risk tolerance is key to not only building wealth but having peace of mind while doing so.
ICCNV is an innovative advisory firm full of experienced wealth management experts dedicated to helping their clients reach their financial goals through smart investing and expert planning.