Don’t Be Afraid to Invest; Be Afraid if You Don’t

By Matt Miczulski 

I golfed recently with my father-in-law and was paired up with another twosome, as it goes. After the turn, at about hole thirteen, one of the guys asked me what I did for a living. I told him I was an investments editor at Finder.

We got to talking about investing, and then he said to me what I hear all too often when this topic arises: “I don’t really invest. I’d like to, but it makes me nervous, and I just don’t know what to invest in.”

According to Finder’s Consumer Confidence Index, more than half of Americans don’t invest outside their retirement accounts. Even retirement savers are in the minority. The Bureau of Labor Statistics’ most recent National Compensation Survey shows that 66 percent of private industry workers had access to defined contribution plans like a 401(k) through their employer in 2022, but only 48 percent chose to participate. And retirement accounts are investment accounts you just can’t afford to live without.

Uncertainty and fear of choosing the wrong investments seem to be significant hurdles that keep many people out of the markets. But, as scary as it may be for some, it’s the avoidance of investing that should really make you worried.

Avoiding investing means avoiding building wealth

Many experts agree that investing is one of the best ways to build long-term wealth. Long-term wealth. Not overnight millions. Not impatiently chasing the next hot under-the-radar stock with the hopes of hitting it big because a stranger on a public forum said it was going to the moon. Investing is not entertainment, nor should it be treated as such. Done properly, good investments will make money. Gambling on penny stocks is not what experts mean when they talk about building long-term wealth through investing. Bad investments will lose money.

Regular investors can take much of the legwork — and anxiety — out of choosing stocks by investing in low-cost index funds, like those that track the S&P 500 or other market indexes. Index funds provide broad market exposure through a single purchase, which helps diversify a portfolio and limit risk. Rather than picking out individual stocks, one share of an index fund gives you immediate exposure to the performance of numerous companies. And if you zoom out and look at the performance of the S&P 500 over time, it trends up. The S&P 500’s chart is an actual illustration of wealth-building, and you can partake in it. The S&P has returned an annualized average return of around 9% over the past 25 years.

But, most importantly, index funds are a fast and easy means to get invested. And the quicker you get your money invested, the better. Compounding transforms money over time. The returns on your investments generate their own earnings and this snowball effect can be significant the more time you give it to accumulate. 

A $25 monthly investment earning 9% — the annual return of the S&P 500 over the past 25 years — for 25 years could garner you $25,625.85 at the end. That’s $25,625.85 you won’t have if you don’t invest $25 each month.

Even a dollar can compound over time. But you need to invest it.

It’s never been easier to start investing

The best stock trading apps no longer charge commissions on stock and ETF trades and offer intuitive trading platforms and helpful research tools and educational resources, all of which make it incredibly easy to get started investing.

Popular stock lists and themed collections are features I see more and more brokers introducing on their platforms as a way to help guide beginners with investment ideas. These are exactly as they sound. Collections of stocks or ETFs based on themes, whether that’s AI, banking or real estate.

Meanwhile, the emergence of free robo-advisors — investment advisory services that use algorithms to manage portfolios — provides a cost-free way to outsource portfolio management. 

All this is to say that investing has never been more accessible or more affordable. Resources are available for you to start investing without requiring you to have any prior market knowledge.

Warren Buffett famously said in his 1986 Berkshire Hathaway shareholder letter that he tries “to be fearful when others are greedy and to be greedy only when others are fearful.” Buffett was talking about employing a contrarian investing approach. Of selling a stock when market optimism runs amok and buying when prices are unjustly beaten down by the shortsightedness of the markets. What he wasn’t suggesting is to let fear keep you out of the markets entirely. Only then will you miss out on the many wealth-building opportunities investing has to offer.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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