A lot of my financial coaching clients have an issue in common: Anxiety keeps them from investing. And though it feels safer to not invest, it’s actually not.

Investing wisely is the only way your money has a chance of keeping up with inflation.

Why does that matter? Think about how much eggs, bread, and rent cost five years ago. Now think about how much they might cost 20 or 30 years from now.

Without growth, your money will buy less and less over time. That can put your future financial comfort and security at risk.

That’s why investing at least a portion of your assets makes good financial sense. Now I won’t pretend that the markets don’t go up and down, and your wealth along with it. But over the long term, that 20 or 30 years, investment values have historically increased. And greatly outpaced inflation. Plus, there are things you can do to minimize the risk without completely losing out on the benefits of investing. But first, you need to take a look at why the thought of investing is making you so anxious.

Fear of Financial Catastrophe Holds You Back

Last year I was working with a client – we’ll call her Kate – who got anxious whenever the idea of investing came up. She feared that making bad investment choices put her ask risk for losing everything.

We traced that trigger back to something that happened when Kate was a kid. Her father had “borrowed” from the kids’ college funds and the family savings to invest in a “sure thing”  without telling her mom. When the investment flopped, she heard her parents fighting and her mom yelling about how they’d lost everything.

And, yes, they lost a lot of money. But they didn’t lose their house. Or their cars. Or have to change schools. The biggest change in her life was intensified fighting between and resentment between her parents. Other than that – and that was big – her everyday life stayed pretty much the same.

But emotionally, her family was different. And as a kid, Kate linked those frightened feelings with money lost to investing.

She was still associating the idea of investing with feeling bad and the idea of losing everything. Now that we knew what was behind the financial anxiety, we were able to figure out ways to make investing feel less scary.

Why Not Investing Isn’t Safe

Keeping your money safely in the bank may keep you from losing money, but it won’t stop you from losing purchase power. No bank account, no matter how good the interest rate is, can keep up with the cost of living.

That means every dollar you have will be worth less and less over time. You won’t technically be losing money… but you won’t be able to buy as much with the money you have.

Investing offers the opportunity to keep up with and even outpace inflation over the long haul. Yes, there will be downturns where your investments will temporarily lose value. But over the long run (at least ten years) stocks tend to outperform everything else.

It’s your best chance to build up wealth. And the more time you have, the more your money will grow. But that only works if you start to invest. You’ll never have more time on your side than you do right now.

How to Take the Anxiety Out of Investing

If you struggle with anxiety (like I do), you know it’s hard to manage.

Anxiety doesn’t care at all about facts or reality. But you can focus on facts and on the things that you do have control over.

And when it comes to investing, there are a lot of factors that you can control. That can make your investing experience less volatile, more steady, and even more profitable. There are specific steps you can take to minimize the risk… and hopefully calm your anxiety as well.

7 Steps to Reduce Investment Anxiety and Risk

When anxiety plays a role in your investment plans, addressing it directly can make the whole process easier.

You know how much you can deal with at a time, and you don’t have to everything all at once. You can break the process down into manageable pieces, take your time, and go at your own pace.

Here are 7 things you can do to calm anxiety and start investing.

  1. Work with an investment advisor (I am NOT an investment advisor) who listens to you and understands your financial anxiety. This needs to be someone you feel comfortable discussing your finances and your feelings with or it won’t be a successful relationship.
  2. Know what you’re investing in. Start with a clear understanding of the different types of investments and their unique risks and benefits. Learn everything you can about every stock, fund, bond, or REIT you plan to buy.
  3. Don’t invest more than you can afford to lose. Create an investment budget to help you figure out how much you feel comfortable starting with. You can start low and go slow – like starting with 5% of your cash and increasing that by 1 or 2% every year, for example. You can always change this as your situation changes.
  4. Create an investment plan that includes asset allocation and diversification to spread the risk throughout your portfolio.
    • Asset allocation means including different kinds of assets in your investment portfolio. Investment assets include things like stocks, bonds, real estate (such as with REITs – real estate investment trusts), and cash.
    • Diversification refers to including a lot of different assets in your portfolio to reduce its overall volatility. That means buying many different stocks or bonds, for example, instead of just a few. It would include different size businesses, different industries, and different pieces (called sectors) of the economy that help balance each other out.
  5. Take a long-term approach. Investing is a long-term undertaking, so you want to look for strong securities with long track records and plenty of future prospects for growth and earnings. While these securities’ prices may move up and down and bounce around in the short-term, over the long haul most good investments tend to trend up.
  6. Create your investment account with an institution you trust. Now that online brokerages are the norm, you have more choices than ever before. Until you’re more comfortable with investing, stick with a name you know and trust, preferably one that gives the option of working with a person if you want to. If you want to verify a particular broker, you can find out more about them using FINRA BrokerCheck. (FINRA is a nongovernmental organization dedicated to protecting and educating investors.)
  7. Don’t look at your investment account all the time. Set specific dates and times, no more than quarterly, where you can check your account balances, check in with your advisor, and make adjustments if necessary.

Again, none of these steps will guarantee that you won’t ever lose any money. Part of the reason that investment returns are higher than savings accounts is to make up for the loss potential, the risk. But reducing your risk where possible and controlling the factors that you can will help take some of the anxiety out of investing.

And investing wisely is the best way to stay ahead of inflation and let your money work for you.

Need help working through these steps? Contact me for a free coaching consultation and we’ll make sure we’re a good fit.