30 Nov The Top 5 Excuses Why People Don’t Invest

Here’s the reality of the situation. Most people don’t have a clue about where to even start with investing. Why would they? It’s not taught in schools and most parents probably give advice based on what figured out along the way and much of that isn’t relevant or its downright wrong. 89% of people say they learned about money primarily from their parents and according to statistics most of them don’t have $1000 in savings. Soooo yeah…that’s like taking dental advice from a dentist with three good teeth. 

In my conversations with hundreds of people, there’s really one underlying reason for why people don’t invest. FEAR.

Fear creates excuses so logic and statistics don’t seem compelling or credible. Fear is a liar and tells you that you won’t make money and that it’s safer under your pillow. There tends to be a few popular excuses born out of this fear so I’ll summarize a few responses that I’ve experienced and that others have communicated.

5 EXCUSES THAT KEEP PEOPLE FROM INVESTING

• Uneducated – I don’t know anything about investing!
• Not enough money – I’m living paycheck to paycheck, how am I supposed to invest?
• Bad timing – The market isn’t doing well right now so I’m waiting for better conditions
• Got burned – I invested in this thing one time and lost money
• Scammed – I did invest but was taken advantage of in a scam

COMPLETELY HONEST MOMENT…I have lost money due to all five of these. And not just chump change either. Here’s a small breakdown of SOME of my experiences losing money in “investing” in things.

HOW THOSE 5 EXCUSES HAVE LOST ME MONEY

• Uneducated – I bought stocks without ever reading a book and made poor decisions, lost a few thousand bucks, but even worse, sold out of stocks I should’ve held (the stock for the company I still work for has gone up 1400% since I started working here 9 years ago and I had a 5-year gap where I didn’t invest in it…so to date I’ve only made 94% which is still great, but much less than 1400%).
• Not enough money – I had money to buy an apartment I was living in during the 2009 economic depression for $35,000 in a great area. I didn’t do it because I “didn’t have enough money”. The reality was I did have enough, but it was going to other things that weren’t making me money and I can’t even remember what those things were! I hope they were worth it because 9 years later, those same apartments are going for $150,000.
• Bad timing – I’ve bought high and I’ve sold low numerous times. Timing is what you make it. A 30-minute lesson on investing and complete control of your emotions mixed with patience will easily make you a millionaire. This is admittedly harder to do since we are humans and not emotionless Vulcans (you know, Spock from Star Trek for my non-geeks out there).
• Got burned – I tried trading stock options twice based on advice from a friend who isn’t an professional investor…or even a good one. I had no experience and did zero homework on it. I lost $2400 in both trades in less than 2 days.
• Scammed – This one wasn’t fun but I can honestly say I was part of the LARGEST Ponzi scheme in history (based on the number of people were scammed: 1+ million). I do a lot of homework and so did the guy that referred me so atleast we were duped by the one that got a lot of other people too (helps the ego a little bit). I put $5,000 in just TWO WEEKS before they were shut down by the government (I recovered a little over 70% of it through lawsuits but that took about 4 years total to get it back).

I can see your face now (in my imagination, not through a hack in your device’s camera…which is possible). “Stephen, WHY are you saying this? It is NOT helping to convince me to invest!” Hang in here and let me explain. Sure, I’ve lost a lot of money but I’ve stumbled my way into a few good investments and one REALLY good one too and I have PROFITED much more than I lost. Even a blind squirrel finds a nut every once in a while. 

Here’s the point to all of that blatant, terrifying honesty. With most of these things, what I did looked like investing, but it was more like gambling. I had no idea what I was doing, ignored (then obvious and now even more obvious) red flags, let emotions take over the decision-making process and I did it anyway! That’s me. I’m a cannonball-into-the-pool-and-figure-out-the-water-is-51-degrees-as-my-body-freezes-up-on-me kind of guy. But I’m also a eventually-learns-from-his-experiences kind of guy. It’s my one saving grace.

Since I’ve gone down in a flashy blaze of glory in every single one of these categories, I’ve learned how to minimize making those mistakes. Here’s some things I’ve learned from some very smart people and implemented for myself in each of these areas.

HOW TO BEAT THOSE 5 EXCUSES

• Uneducated – Read. Read. Read. Hate to break it to you. That’s the primary thing that’s going to fix this and you don’t need to know finance to do it. Trading platforms like Fidelity and Etrade will offer free webinars where you can learn as well. Subscribing to this blog and recommending it to others will also provide you good fortune (okay, so its a shameless plug…I’d apologize, but that’d defeat the point of it being a SHAMELESS plug)
• Not enough money – YES. YOU. DO. I’ve NEVER met someone that didn’t have money to invest (with the exception of some homeless people in Haiti living in a corrupt government system with a broken economy living on barely a $1/day, so if that’s you, then you are exempt from this statement). Some have more than others but you can. Remember, paying off debt with high interest rates faster than the monthly minimum IS an investment (more on this in another post coming soon).
• Bad timing – “When there’s blood in the street, buy real estate.” This is a popular saying that basically means where there is disaster, there is opportunity. Also, when the economy is humming and things are rolling along, there are also good investment opportunities. Point is, just because it’s bad timing for one investment, doesn’t mean it’s bad other opportunities. You just have to find it. Also, you can wait out bad timing. People that sold in the financial downturn could’ve made a lot of their money back a decade later and if they would’ve kept investing during that time, they likely would’ve come out MUCH richer.
• Got burned – Accept the fact that you will lose money in some investments now. No one wins them all. If you do that, you won’t be shocked when it happens. The goal is to minimize your losses. Here’s an example of one way to do so. When trading stocks, have a “stop-loss order” prevents you from losing more than a certain amount if a stock dips.
• Scammed – If it’s hard for you to understand, don’t do it. Ever. If you are new to investing, stick with publicly traded business and mutual funds. Don’t flip a house or join a pyramid scheme that’s “totally not a pyramid scheme” unless you truly know what you’re doing and have researched it thoroughly. Random thought…if you want to get into flipping houses without flipping houses, there are privately and publicly traded funds and companies that will allow you to invest in it and take a portion of the profits. Find a niche and get good at it. (Note: If anything requires you to purchase a money order, gift cards, or anything that isn’t a credit card, that’s a HUGE red flag. EVERY legit business will accept a credit card/debit card.

I hope this helps getting you past some of the more popular excuses to help you remain in mediocrity. One day I’ll talk about my investing wins but it feels a bit braggy and God knows I do too much of that right now as it is. I’m happy to discuss them in one-off discussions in order to help people learn and hopefully copycat them if possible so don’t be shy to ask. Also, I’ll leave you with this.

Here are the 30-year returns in the S&P 500 for the past 90 years. If nothing else, put your money in an index fund and forget about it and let it make you money. Despite a few global recessions, some local recessions and huge companies going bankrupt or being dissolved, the market ALWAYS makes money over long periods of time.

• 1926-1956: +10.77%
• 1956-1986: +9.63%
• 1986-2016: +9.99%