There are a multitude of reasons why most Aussies never make the jump into investing in the share market. These were the things I had to overcome myself to start my journey into investing in shares. When I was younger I was obsessed with get-rich-quick schemes that required minimal effort and huge rewards. I finally learned that it is extremely difficult to build wealth this way unless you are a movie star, athlete, or tech genius. Let’s face it I am never going to be any of those things. This meant I had to face my reality. I am never going to be a super-rich multimillionaire with a mansion, Porsche, and a maid…..and that is okay. Whilst we all might fantasize about winning 50 million dollars on Powerball the reality is that to earn that type of money from scratch is unrealistic for most. However, it is not unrealistic to reach a comfortable early retirement if you are frugal, earn a salary of between 60-90K, and make financial security an important life goal.
There are differences in investing habits of men and women as well as various factors that influence this. The gender pay gap is real so women are often earning less than their male counterparts, meaning less discretionary income left over to invest with. Studies have also shown that women are less confident in their investing abilities than men. A survey by S&P Global found that only 26% of American women have money in the stock market. Per U.S. Trust, 65% of women have a large percentage of their assets in cash, compared to 51% of men, and 41% of women have no plans to invest that cash, compared to 31% of men. I couldn’t seem to find any Australian statistics on this topic but it is safe to say the trend of fewer women investing than men is probably true here as well.
Reasons people never start investing:
1.They feel like they don’t have enough money. The truth is you don’t need that much to get started. You can start investing with as little as $1000. Although due to brokerage costs I like to invest a minimum $5000. Even investing $5000 per year is better than nothing and will slowly build over time. There are also micro-investing options available now where you can invest as little as $5 without fees up to a certain amount. Due to the low initial investment that is required, micro-investing has boomed in recent times. A plethora of new companies have launched apps in this space hoping to get young people to use their platform. Micro investing platforms are certainly not the only way to get started, however, if you have minimal funds or are just wanting to dip your toe in the water then it can be a good way to get an understanding of investing.
2. Wanting amazing rewards in 12 months. Unfortunately, if everyone could pick a stock that has 3000% gains in 12 months then we would all be rich. But again expecting this is unrealistic. Building wealth in the share market is a long-term game at least 10-20 years you should be aiming for. You have to be consistent and committed to continually adding money into your investments as well as reinvesting the dividends to ensure compound interest.
Slow and steady wins the race as they say. Speculative stock picking or day trading is very different to long-term investing. Speculating and day trading stocks can be extremely risky and is not ideal for someone trying to build long-term wealth in the market. Of course, there will always be exceptions to this rule. Sometimes people will invest in a small company which over the course of a short period of time returns huge gains. That is why diversification is so important to your investment portfolio. If you want to invest in a start up because you understand the business model and think it has potential then that is fine, just make sure you are not putting all your eggs in the speculative basket..so to speak.
3. Getting burned once. Buying shares in a trendy start up company, only to have it trade off the market completely and lose all your money is a sure-fire way to never look at investing again. This kind of happened to me when I bought my first shares and convinced my dad to invest as well and we are currently 40% down. But ahh well it taught me a great lesson. Now I only invest in established profitable companies and ETF’s to try and ensure as much risk mitigation as possible as well as being very diversified. Every investment has an element of risk but understanding your risk tolerance and putting a plan in place that suits that is integral to an effective long term investment strategy.
4. Lack of knowledge and lack of confidence. Again this was me. No one in my family had ever invested in the share market. In fact, it was the opposite, it was viewed as gambling. This was my same attitude for a long time until I educated myself. Maybe lack of knowledge was a reason prior to the internet but now there are no excuses. There are a wealth of resources available to people to learn how to invest and how to assess what you might invest in pertaining to your risk tolerance. Thanks to the internet, investing in stocks has become so much more accessible to the everyday person. It used to just be the rich who invested, getting them richer and richer, but now everyone has the ability to invest.
5. Missing the best times to buy. Hindsight is always 20/20 but just because you missed out on buying half-price bank shares after the covid crash doesn’t mean you should not get started investing. It is a major regret of mine that I only started investing in 2021 but next time there is a crash I will be pouncing on discounted shares. If only we all had the foresight to get started ten years ago but it is better to start now then wait another ten years. No one will ever have a crystal ball and that is why dollar-cost averaging into the share market consistently over time is a proven investing method. When the market inevitably has a downturn, the important thing is not to panic sell. You should be investing for the long term and over the long term, the market has historically averaged growth over the past 90 years.
6. Needing the money now. The best type of investment in the share market is a long term investment over a period of at least 10 years. If you are saving for a house deposit, a baby or something else that means you may need to access the money early, then it may not be the wisest decision to put it all into the share market. The share market is not a savings account. It is never ideal to be in a position where you might be forced to sell at a loss due to needing the funds immediately. The share market can be volatile and just because it has an overall trend of growth, does not mean that it is not possible to lose some serious money when it has it has its downturns.
7. Too risky and doomsday headlines. How many times do we watch the news and the talk of an impending crash and how much money everyone will lose. This is enough to scare anyone into keeping all their hard earned cash in a savings account earning 0.01% interest. Of course, if you feel comfortable with the majority of your money in savings then keep the majority of your money in savings but it doesn’t mean you can’t diversify by putting a little bit into shares or a low-cost ETF. On average the share market has delivered a 7% return since its inception so as long as you can handle the fluctuations and do not panic sell in a crash, on average your investment will usually go up. So get started and your future self will thank you!
