If you're like the majority of Americans, you're probably a little intimidated by the idea of investing. In fact, an Ally Financial study shows over 60% of Americans are scared of it, so you're not alone. This figure may be even higher for millenials. But that doesn't mean you should avoid investing. To the contrary, overcoming your fear of money and investing can be one of the single most powerful self-improvement hurdles to master. It can not only make your psychological outlook more positive, but it can also yield tangible financial results that will measurably improve your material well-being.
Here are three ways to start taking control of your investing future rather than avoiding it out of fear.
1. Make your 401(k) your best friend
For many of us, the first experience with investing is through employer-sponsored retirement plans, such as a 401(k). This can be a great place to start because employer plans often use target-date retirement funds, or other core index funds, as default plan selections, which are ideal choices for novice investors, or those who wish for a hands-off approach.
Employer plans also usually offer support from your HR department or the plan's service provider when it comes to understanding basic investing concepts like asset allocation and diversification to make sure you don't take too much risk. Take your time to understand the offerings, the costs, and your choices. Over time, your confidence will increase, and even if your contributions are initially small, they serve as training wheels for more independent investing in the future.
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2. Learn a little about investing
If you're reading this article, it's because you've already taken the first and most critical step toward overcoming your fear of investing — you're educating yourself, seeking out information to help empower you and make better financial choices. When it comes to self-education, we all have to start somewhere, and online videos, tutorials, guides, and discussion forums are a good way to master basic knowledge, and engage with others, like you, who want a better grip on their finances.
Many major financial services companies offer excellent (and free) financial education materials, such as Vanguard's Plain Talk on Investing,TD Ameritrade's Education portal, or Morningstar's Investing Classroom. Other great sources include the American Institute of CPAs' 360FinancialLiteracy.org, Investopedia, and many of the resources shared via Investor.gov.
3. Learn a lot more about investing — by investing
Reading and educating yourself is just the first step: You'll need to take the plunge into actual investing, and that's where the most important learning happens. Your first forays into investing should ideally involve a relatively small amount of capital. You should also consider seeking the advice or support of a professional, or knowledgeable family member.
Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.