plonkee money an english-er's thoughts on personal finance

June 14, 2007

the only thing to fear…

Filed under: investment — plonkee @ 12:00 pm

Why don’t as many people invest in the stockmarket?

I think a large part of the reason is fear. People are afraid that they will lose all their money, like in the depression (even though I don’t know anyone who can really remember that far back) or even just in the recent tech stock crash.

People often associate investments with the kind of roller coaster ride of the wheeler-dealer trader, buying and selling to time the market. But if instead you launch yourself with a well diversified portfolio and hold it for a long time you are extremely unlikely to lose all your money. Its possible that you won’t make as much as you thought, and plausible that over the shortfall you could lose some – but then if you don’t invest you could lose money in real terms through inflation anyway.

The way to counteract your fear is to be truly educated about the risks – both the risks of being in the stockmarket and the risks of being outside it. And then to minimise all the risks (with a well-diversified portfolio).

The only thing to fear…

…is fear itself.

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