10 Limiting Beliefs That Stop You From Investing—Plus Myth Busters for Each One

Toxic money beliefs prevent you from living a rich life. Address these beliefs to unlock a world of investing

written by oz chen

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10 toxic money beliefs investing beginners

If you’ve thought about investing but have not taken action due to fear… then I wrote this for you.

On one hand, you sense that your cash is losing value because something something inflation. On the other hand, investing feels too complex and you don’t want to lose your money.

Beliefs drive behavior. Our money beliefs drive what we do (and don’t do) around investing.

Through my own experiences and fascinating conversations, I’ve identified top 10 limiting beliefs that stop people from investing. Here are jump links to each money belief:

  1. “Investing is too complicated for me”
  2. “I need a lot of money to invest”
  3. “Investing is gambling”
  4. “I don’t know which stock to pick”
  5. “I don’t want to lose all my money in the stock market”
  6. “I think the stock market is too high”
  7. “I don’t have enough time to invest”
  8. “I can’t invest until I pay off all my debt”
  9. “I’m not good with money”
  10. “I need a financial advisor”

Seeing our beliefs written out in plain sight can help remove blockers to investing. Ready? Let’s dive in.

1) “Investing is too complicated for me”

It’s not investing that’s complicated – it’s the perception that investing is complicated. Yes, there’s some jargon to wade through, and finance bros can make investing feel icky.

But consider this: Investing is probably far easier than you think. It can be automatic, hands-off, and doesn’t require much work at all after some set up.

Also consider that you’ve most likely learned things that are way harder than investing. You’re telling me you passed high school biology or know CPR? Science is way more complicated.

Money Myth Buster: Adopt a growth mindset. You might not know much about investing now, but trust that you will learn to invest.

2) “I need a lot of money to invest”

There’s a common “all or nothing” belief that you can only invest once you have tons of money to invest.

Today, you can invest as little as a dollar. Even if a stock is $1000 per share, you can buy a fraction of that share for $1. If the stock goes up 10%, you’ll still benefit from the same growth.

Thanks to technology, investing is not only inexpensive—it’s free and more flexible than ever. In 10 minutes, you can open up an investing account on your smart phone for free and start investing. (But read this beginner’s guide to investing before picking random stocks).

Money Myth Buster: Open up any of these free investment accounts and get a bonus: M1 Finance ($50), Robinhood (free stock), Public (free stock), or WeBull (free stock). These platforms allow fractional shares, so you can buy shares for as little as $1.

3) “Investing is gambling”

It’s reasonable that those who lost a lot of money in the 2000 and 2008 crashes distrust the stock market. That distrust can even be handed down as financial baggage, preventing the next generation from investing.

Investing is the practice of growing your money by taking on calculated risk. Gambling is taking on excessive risk. These are signs that exhibit a gambling mindset:

  • Not understanding the investment you’re buying
  • Not being diversified enough in your portfolio
  • Chasing quick returns

The stock market can be a casino if you gamble. It can also be a long-term money printing machine.

Money Myth Buster: Study the historical returns of the stock market and understand how it goes up over the long term. Take on a long term view of investing.

4) “I don’t know which stock to pick”

Many people have this image of investing: a sophisticated market “whiz” who picks a winning stock and becomes a millionaire. This is not helped by the many media outlets that say “If you had only bought $1000 worth of Google stock, you’d be a millionaire today…”

Investing does not equal picking individual stocks. In fact, studies show that most day traders lose money. Instead, any investor can do quite well by buying and holding a diversified basket of stocks, rather than just any 1 stock.

  • Investing: Buying a diversified basket of stocks like the S&P 500 index averages returns of 8-10% a year over the long term.
  • Gambling: Trying to pick 1 winning stock out of 4000+ public companies.

Money Myth Buster: Buy an S&P 500 Index Fund (example: VOO) instead of buying an individual stock.

5) “I don’t want to lose all my money in the stock market”

This is a perfectly valid fear. The stock market, just like any other investment, comes with risk.

Good news: You don’t have to put all your money into stocks. You can, however, divvy up your money into buckets. Here’s an example for someone with $10,000 to budget.

  • 50%: Invest $5000 into the stock market
  • 40%: Put $4000 into savings
  • 10%: Set aside $1000 to play with crypto or alternative investments

The exact breakdown above matters less than adopting a “portfolio” mindset to your money, and determining how much risk you’re willing to take for reward.

Money Myth Buster: Choose a budget to put towards investing. Start with a % of your take home pay or a % of extra money you may have on hand.

6) “I think the stock market is too high”

The media will scare you into believing that another crash could happen any day. It’s easier to be a stock market pessimist than an optimist; you don’t get punished for warning people of bad stuff, but you could be blamed for fraud as called a fraud for the latter. Consider this…

  1. Over time, the stock market has only trended up.
  2. If people really knew how to time the market, then everybody would be rich already.

Good news: you don’t need to time the market. You can dollar cost average, which is a fancy way of saying “buying into an investment over time.” Also known as drip investing or automatic investing.

Time in the market beats timing the market

Often attributed to Warren Buffett

Dollar cost averaging means you’ll buy when the market is high, and also when it’s low. The idea is that over time, the price at which you buy into evens out while the entire stock market has trended up.

Money Myth Buster: Put your investments on autopilot so that it invests on your behalf without you having to touch it.

7) “I don’t have enough time to invest”

There’s a common misconception that investing needs to be an active sport. That one idea births several other bad ones, like thinking that you need to trade stocks, learn options, time the market, or in general make investing a job.

Investing can be passive and take very little time. There are studies demonstrating how passive investing beats active investing.

Your portfolio is like a bar of soap – the more you handle it, the less you’ll have.

This doesn’t mean you can’t ever do active investing, especially if you’re interested in emerging markets (ahem crypto) or alternative investments. But most people will fare better by first building a foundation based on passive, well-researched investments. Then play with extra money however you want to.

Money Myth Buster: Set an automatic, repeated buy into your investments. This is how 401Ks work by default, and it’s quite easy to do in any modern finance platform. Check in on your investments infrequently, like every 3-6 months, and realize how little work you have to do.

8) “I can’t invest until I pay off all my debt”

It’s not a bad idea to prioritize paying down debt. But debt can be an excuse to never start investing.

It all comes down to the type of debt you have, and how much. Let’s play with some numbers:

  • Student loan: 5% interest (stat) on $30,000 (stat): $1,500 annual interest
  • Credit card debt: 20% interest (stat) on $3000 (stat): $600 annual interest
  • You know that the stock market, over the long term, returns 8-10% per year.

If you have an extra $1000 each month to go towards debt or investing, you should just pay off the credit card debt—think of it as a guaranteed 20% return on your money.

Then what? Paying off the student loan and investing in the stock market both operate on longer time scales, with similar returns. You can then decide to use a 50/50 approach: use half of your funds to pay off debt, then the other half going towards the stock market.

The exact split matters less than deciding how you want to allocate your money between debt & investments.

Even people with a lot of debt can benefit from investing a tiny bit. Literally $10 or $100 a month. This is to build up the habit of investing, which is best played as a long term game anyway. If you know how to treat a small portfolio well, you’ll be ready to play with a big portfolio.

Good news: there are apps like Acorns that use the spare change from your shopping to automatically invest for you. If you spend $1.51, it’ll invest the remaining $0.49 of your “round up.” Similar apps like Digit also make micro investing super easy.

Money Myth Buster: Use a spreadsheet to put your debt and interest rates alongside how much money you have to invest. Compare them side by side to come up with a plan. Check out micro-investing apps like Acorns, Qapital or Digit.

9) “I’m not good with money”

This is a blanket belief that prevents so many people from investing. If you’ve made it to #9 by now, then you’ll know that investing can be easy and passive. But just to nip this in the bud…

You’re not good or bad with money. You’re just trained or untrained.

When you start thinking of something as a skill rather than a fact-of-life, then you’re more likely to give it a shot.

Some people believe that you have to be good at math to invest. You don’t—I’m certainly not good at math. To invest, you only need addition, multiplication, division…all things you can do on a calculator. I don’t know when’s the last time I ever used algebra, especially not for investments.

After understanding some basic investing concepts and starting some automated investments, …you don’t need to do much. Investing is more of a behavioral skill than an active skill.

Money Myth Buster: Look up basic investing concepts and challenge yourself to learn them in an hour or 2. Compare these concepts to more advanced concepts you’ve had to learn for your job or other project.

10) “I need a financial advisor”

Most financial advisors charge based on how much money they manage for you. That fee can range from 0.25% to 1% per year.

If you had $100,000 to manage, that would cost $250 to $1000 per year. That eats away from the return on your money. On top of that, many financial advisors promote their own investment products, which often have higher fees.

Remember how I said passive management beats active management, and that most fund managers underperform the market? Similarly, you can buy the stock market (S&P 500 Index), and probably do better than if you paid to work with a financial advisor.

I would only consider getting a financial advisor if you absolutely don’t want to invest yourself and want someone to do it on your behalf. In that case you hiring a financial advisor will probably give you a higher return than if you had just let your money sit in savings account.

Money Myth Buster: Before paying for a financial advisor, ask for a free consultation. Asking is free: find out what fees they charge and what their approach is. Take notes, Google and see if you can DIY. Honestly, your portfolio will probably do better if you just made regular investments into the stock market on your own.

Out of these 10 toxic money beliefs that prevent people from investing—which ones resonated with you the most? Which ones did I miss?

If you’re something is still holding you back from investing, I want to hear from you. My special power is helping people feel a sense of ease and power around investing. Sign up for my newsletter and reply to my personal email there, and I can hold your hand to help you invest your first dollar.

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