How to overcome the fear of investing (and 3 steps to get started)

2. Fear that investing is too complicated

Many people avoid investing because they assume it requires advanced financial knowledge or constant monitoring of the stock market. However, investing doesn’t have to be complicated.

Index funds and exchange-traded funds (ETFs) allow you to invest in a diversified portfolio without needing to research individual stocks. These funds spread your money across multiple companies, reducing risk while providing strong long-term growth.

For example, an S&P 500 index fund gives you exposure to 500 of the largest U.S. companies, meaning you don’t have to pick individual winners. Investing apps and robo-advisors also simplify the process, offering automated portfolios based on your risk tolerance and goals.

How to overcome it: Start with a simple investment, such as an S&P 500 ETF. It provides instant diversification and long-term growth without requiring active management.

3. Fear of making mistakes

Another reason people hesitate to invest is the fear of picking the wrong stocks, buying at the wrong time, or losing money due to poor decisions. But even experienced investors don’t always make perfect choices.

Instead of trying to time the market, a proven strategy is dollar-cost averaging—investing a fixed amount at regular intervals (e.g., €100 per month). This approach reduces the impact of market fluctuations because you buy at both high and low prices, averaging out your cost over time.

How to overcome it: Set up an automated monthly investment in a diversified index fund or ETF. Consistency is more important than perfect timing.

The cost of avoiding investing

While the fear of losing money is understandable, many people don’t consider the hidden cost of not investing, also known as the “missed opportunity cost”.

Keeping Money in Savings

Imagine you have €10,000 and keep it in a savings account earning 0.5% interest per year. After 10 years, your balance grows to just €10,500.

Now, let’s compare that to investing:

• If you had invested that same €10,000 in a diversified stock market fund with an average annual return of 12%, your investment could grow to approximately €30,782 in 10 years.
• In 20 years, your savings might grow to only €12,200, while your investment could be worth over €64,000.

That’s a difference of more than €50,000, simply by choosing to invest instead of keeping money in a low-interest savings account. Inflation further reduces the purchasing power of savings over time, making investing a crucial strategy for financial security.

3 steps to get started with investing

Now that you understand why investing is essential, here’s how to get started in three simple steps.

Step 1: Open an investment account

Before you can invest, you need a place to hold your investments. This means opening an investment account, which typically falls into one of two categories:

1. Tax-Advantaged Accounts

• Individual Savings Accounts (ISAs) in the UK. Allow tax-free investment growth and withdrawals.
• 401(k)s and IRAs in the US. Provide tax benefits, either tax-deferred or tax-free.
• Pension or retirement accounts in other countries. Often come with employer contributions or tax benefits.

2. Standard Brokerage Accounts

If you’ve maxed out your tax-advantaged options or don’t have access to one, a standard brokerage account is a great alternative. These accounts allow you to invest in a wide range of assets, including stocks, bonds, exchange-traded funds (ETFs), and mutual funds. However, unlike tax-advantaged accounts, you may have to pay capital gains tax on profits depending on where you live.

How to open an investment account

Opening an account is usually quick and easy, especially with online brokers that allow you to apply in just a few minutes. Many platforms have low or no account minimums, meaning you can start investing with just a small amount of money.

When choosing a brokerage, consider:

• Fees. Look for platforms with low or no trading fees.
• Investment options. Ensure the platform offers stocks, ETFs, and bonds.
• Ease of use. Some brokers provide beginner-friendly tools and educational resources.

The most important thing is to take this first step—without an account, you won’t be able to invest at all.

Step 2: Fund your account

Once your account is open, the next step is adding money to it. Many new investors open an account but hesitate to invest, leaving it empty for weeks or months.

Why Automation Helps:

• It removes emotion from investing by ensuring consistency.
• It builds good financial habits, making investing a routine expense.
• It takes advantage of dollar-cost averaging, reducing the impact of market volatility.

Set up a recurring transfer—starting with as little as €50 or €100 per month—to ensure you’re consistently investing.

Step 3: Build your portfolio

With your account funded, it’s time for the most exciting step—choosing your investments. However, investing isn’t just about randomly picking stocks or following trends. A well-structured portfolio requires careful planning and diversification.

The importance of diversification

Diversification simply means spreading your investments across different asset types to reduce risk. Instead of putting all your money into a single stock, a diversified portfolio might include:

• Stocks. Shares in individual companies, which can offer high returns but come with more risk.
• Bonds. Fixed-income securities that provide stability and predictable returns.
• Exchange-traded funds (ETFs) and index funds. These funds bundle multiple stocks and bonds into a single investment, making diversification easy for beginners.

For those unsure about what to invest in, broad-market index funds (like S&P 500 ETFs) are a great starting point. They provide instant diversification and have historically delivered strong long-term returns.

Final thoughts: Take the first step today

Starting your investment journey doesn’t have to be complicated. By following these three steps—opening an account, funding it, and building a diversified portfolio—you can take control of your financial future.

The most important thing is to take action. The sooner you start, the more time your money has to grow. Whether you begin with a small contribution or a larger investment, every step forward brings you closer to financial freedom.

Investing isn’t just about making money—it’s about financial security, independence, and creating opportunities for your future. So don’t wait—open your account, set up an automatic contribution, and take that first step today.