Investophobia, or the fear of investing, is a real problem and it could be preventing Australians from pursuing wealth. While we know the road to wealth creation isn’t always smooth sailing, it’s made even harder if these common investment myths are to be believed.

In this blog post, we will debunk myths, dispel fears, and share valuable wealth creation strategies.

What causes a fear of investing?

The main cause of this fear stems from making investing mistakes that result in significant losses, however it’s further provoked by some of the wealth creation myths that surround the investment industry.

While investment risks exist, by putting emotions aside and avoiding misconceptions, you are more likely to open yourself up to wealth building opportunities that could help you achieve your financial goals.

Investment myths and how to overcome them

Here are the most common problems both beginners and seasoned investors face when pursuing wealth.

Myth #1: You need a lot of money to start investing

Truth: Australians mistakenly believe that they need $15,200 to get into the investment game when you can start with as little as $5. If you have a sound strategy, a realistic plan, and a clear goal, you can start investing and building assets with any amount of money.

Solutions:

• Many people ask how to create wealth from salary and one way, is to set aside a percentage of your monthly income for investing regularly

• Choose low-cost and diversified investments that match your risk tolerance

• Take advantage of compound interest and reinvest your earnings

Myth #2: You will lose all your money if the market crashes

Truth: Investing comes with a certain degree of risk, including losing some money when the market crashes. Thankfully, market crashes are rare and temporary events that can be mitigated.

Solutions:

• Understand the historical performance and behaviour of the market and different asset classes

• Diversify your portfolio across different sectors, regions, styles, and wealth creation strategies.

• Stick to your plan and avoid panic selling or buying during market fluctuations.

In the past 36 years, major stock market crashes happened only four times. On average, that's once every nine years. Fearing a crash could cost you decades of potential stable returns and hamper attempts at wealth creation.

Myth #3: You need to time the market to make profits

Truth: This myth suggests that you need to buy low and sell high or predict future market or stock movements to make profits. Timing the market is difficult and often counterproductive.

Solutions:

• Focus on your long-term goals rather than short-term noise

• Invest regularly and consistently regardless of market conditions

• Follow a buy-and-hold strategy rather than chasing trends or fads

Recent research demonstrates that investors who try to time the market don't just get lower returns; they also assume more risks.

Benefits of overcoming investing myths and fears

Uncovering investment opportunities is a large part of the wealth creation process and facing these myths head on may help you:

• Gain confidence and take control. Confidence is an essential component of successful investing. While knowledge, research, and intuition are valuable, it's the confidence that helps you make sound decisions at the right time. By dispelling investing myths and fears, you can gain much-needed confidence and take full control of your actions.

• Minimise errors and achieve financial goals. Only a rational, evidence-based approach to investment can yield the desired results in the long run. Myths and fears force you to make irrational decisions, avoid opportunities, and ignore calculated risks.

Five principles for long-term investing

Now you know the myths to avoid and how to overcome them, here are some tips for successful investing over the long term.

• Don’t fall for hot tips. Do you own research no matter the source of the tip and always be objective in your decision making.

• Stick to your strategy. If you don’t have an investment strategy, get one. If you do, remember that it’s there for a reason. Adopting lot of different approaches without clear direction could prove risky.

• Don’t focus too heavily on the short term. Be confident in your investment’s big picture and try to resist making any rash decisions based on market volatility.

• Be aware of tax implications. Don’t let fear of taxes deter you from your investment goals. While it’s good to be aware of tax implications, it doesn’t have to be the main determining factor.

• Seek expert investment advice. You don’t have to go it alone. Getting advice from a financial adviser could help you make more informed investment decisions based on your lifestyle and wealth creation goals.

Wealth creation tips and investment advice

Facing investing myths and fears takes more than just learning about their existence. We recommend digging deeper into the causes to understand how they are affecting your investing potential. Once you do, you’ll be in a better position to avoid the emotional impact of fear and make educated investing decisions.

• Keep learning – master investment basics, such as risk-return trade-off, asset allocation, diversification, compounding interests, and others.

• Ask for help – seek professional advice from qualified financial advisers who can leverage extensive investing experience to help you create a personalised plan.

• Stay on top of your actions – monitor your plan and portfolio regularly to make the necessary adjustments without emotional decisions.

Remember, educated investors aren't fearless. They simply know how to counter these fears with research and professional financial advice.

How Findex can help

Our wealth management team can provide tailored wealth creation and investment advice that aligns with your financial goals. Working with an experienced financial adviser can help you understand the causes of your fears and provide the necessary guidance throughout your investment journey.

Further reading: Find out more about the benefits of hiring a financial adviser.

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