For a lot of us young professionals, the “I” word is a scary word. Investing is something that rich people do, or something that we’ll do when we get older. Sure we “invest” in our retirement (you better be!), but outside of that, investing is not something we do. Truth is, investing our money is something that all of us should be doing, no matter where we are in life or how much money we have. Investing is taking an educated risk with our money, in the hopes of having a better future. I solicited some reasons as to why my readers aren’t investing, and wanted to break a couple of them down.

An important concept to start with is that your money is in fact of value. When put to work properly, your money can bring you more money by investing. Investing is just a fancy word for doing something with your money aside from putting it under a mattress. You can either go buy something with it that you hope will increase in value (i.e. stocks/mutual funds) or you can lend it to someone and they’ll pay you interest (i.e. a savings account or a Certificate of Deposit). The stock market is obviously riskier than a savings account, thus the potential for reward is greater with stocks. In a savings account you’re not going to lose your money (insured by the government for up to $250k), but you’re also not going to earn that much either.

I’ve come across a few worries or fears that other young professionals have and wanted to do my best to dispel them.

1) I already have a retirement and a savings account, what do I need to invest for?

I try to look at my investing on a high level. I contribute 8% to my retirement right now (I wish it was more), so I’ve got my long term future ‘covered’. I’ve got a well stocked emergency fund sitting in a bank account right now. My wife is hammering away at her student loans and we plan to have those paid off in the next two years. We feel good about our debt and our emergency fund. In the future though, we’re going to have some major purchases. We’re saving up for a house, our cars won’t last forever and we’ll need new ones and would like start a family in the distant future (yikes). In my mind, that’s what any ‘savings’ I have is going to, sort of my 5-10 year needs. I could just let it sit in a savings account, but at best I’d only be earning 0.8% interest. That means I’m basically earning pennies on my money. I’m not losing any of it, but I’m certainly not gaining any. Now granted, this savings money is important to me as I’ll need it in the future, so I definitely keep a good chunk of it in my savings account where it’s safe. A fair amount though, I invest in the stock market. I put the bulk of that money into a mutual fund, where I hope to earn 10% each year. I’ve got a handful of actual stocks that I invest in and several of them have done well for me.

It is ultimately up to you as far as what you want to do with your “savings” money. I would encourage you to not settle for the security and safety that comes with a 0.8% interest rate though. It’s your future and you can do better.

2) I just don’t know how to invest and aside from reading multiple books on the topic, I don’t think I’ll ever know how to.

It’s important to note that reading a bunch of books won’t necessarily help you become a better investor. Sure it’ll give you some frameworks and strategies but you don’t need a PhD in Investing to be a successful investor.

I’d recommend that the best way to learn about the market is to get in there and learn! Just like learning a new language or picking up a new hobby, it’ll take time and practice. There are plenty of stock market games out there that you can use. Or just try to check Yahoo Finance once or twice a week. Pick a couple of stocks and track them over the next couple of weeks. You don’t actually have to put money in the stock market to learn about it. Try to focus on big picture trends (how the market is affected by outside news and which outside news affects it the most), as well as learning to focus on specific stocks. Within an industry see if you can pick the stock that you think you’d actually invest in (ex: Coke vs Pepsi or Apple vs Google).

3) I just don’t have that much money to invest to make it worthwhile.

My first stock investment (besides when I was an ambitious 13 years old) was $100. I put $100 into one stock (Ford Motor Company). That stock did well for me and I actually doubled my money. My $100 had turned into $200. I sold some of my first stock and bought a second stock. That stock also did well for me. Little by little I was able to grow my stock portfolio. (When you invest in the stock market, you get to throw words around like my “portfolio”).

The whole point of investing is to receive a good return, higher than just leaving your money in a savings account. As long as you are receiving a good return, it shouldn’t matter how much money you actually made. By starting small and investing well, you are setting yourselves up for success. Just like when young professionals start saving for retirement, the dollar amount isn’t that high; but it’s a step in the right direction. If you can be successful with a little bit of money, then you can be successful with a large pile of money. Start early and start becoming a wise investor.

Hopefully that answers a few of your questions and calms some of your fears. Check back Thursday to address the final 3 fears that I often hear!

Hope you enjoyed the article! Please consider sharing on Facebook/Twitter! Preesh! Here are some other articles you might enjoy:

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