The most common reasons why people aren’t investing in stocks

Investing in stocks to build passive income is something that not everyone has started with. We have listed the main reasons that hold people back when it comes to investing in the stock market.
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Long-term financial future and day-to-day finances are self-reported to be top stress drivers for millennials and Generation Z according to a 2020 Deloitte survey. However, most people are missing out on one of the most effective ways to grow wealth and increase financial security: investing into the stock market. In this article we will look at the most common reasons why people aren’t investing in stocks and break them down one by one. 

Saving money

Saving money is probably the first financial lesson your parents have taught you. It started with a piggy bank and then moved to opening a bank account and finally a savings account. Back in the day, a savings account would pay out a significant amount of interest which means that saving money would automatically generate passive income. Passive income is money that you earn without active involvement. In the current economy, interest rates paid on your savings are historically low and sometimes even negative. That means oftentimes you have to pay your bank interest over your savings instead of them paying you! Don’t get me wrong, you still need savings for big purchases and an emergency fund but to generate passive income investing your money might be right for you.

Never enough money

According to a survey done by JPMorgan Chase with a sample of 1200 investors and non-investors, over 40% of non-investors say they don’t have enough money to start investing in stocks and 63% believe that you need at least 1000 euro starting capital. However, this is one investing myth we will bust for you right here and now! The truth is, you can start investing in stocks with as little as 100, 50 or practically even 1 euro. 

The valuable ingredient to building wealth actually might surprise you. As said by the guy on the 100 dollar bill Benjamin Franklin: “Time is money.” Back in 1719, a time before the modern-day stock market, this saying was intended to convey the monetary cost of laziness. Ironically, in this case, it conveys the monetary profit of laziness. A little thing called compound interest is the reason why when you start investing is more important than how much you invest. 

Let’s illustrate the power of time with a small example. Imagine Chloe and Diogo both invest 300 euro every month for 8 years into the same index fund with an average return rate of 10%. Chloe starts investing when she is 19 and Diogo starts at the age of 27. Chloe and Diogo both invested a total of 28.800,- euro and will retire at the age of 65 but if the annual interest rate stays on an average of 10% Chloe will end up with almost one million euro - that’s right, 1.000.000,- euro - more than Diogo. The secret of getting ahead is getting started. Just put your feet up and let your money work for you.

Investing is too risky

​​Those who are fearful about investing are most worried about volatility, which oftentimes is caused by a sudden market crash or economic uncertainty and which makes people feel like they are risking all their money. To be fair, if you don’t understand the stock market nor know how to put together a low-risk portfolio, investing in the stock market probably feels like gambling your savings in a game of roulette. Luckily, there is such a thing as ‘risk management’ which is a process of identifying, assessing and controlling threats. One way of minimising your exposure to systematic risk in the market is by having diverse asset classes and investments in your portfolio. This technique is called diversification.

Let’s go back to the roulette analogy: you wouldn’t put all your chips on one number, you would spread them out over the table so your chances of winning would increase. I hear what you’re thinking, it sounds like a lot of work, right? If the answer is yes then an ETF investment could be your perfect starting point. Like stocks, Exchange-traded funds (ETFs) can be traded on exchanges and have a price. Unlike stocks, which represent just one company, ETFs represent a bunch of companies and provide better diversification than a single stock. On the heyfina app you will be able to start with an ETF investment that fits your values and beliefs. Our app will offer themes that cover a wide range of topics that are close to your heart. From green energy to clean water, female-led companies and many more, simply choose where you want to make an impact and let your money work. Sign up to our waitlist to be one of the first to make their money work with the heyfina app.

Investing is intimidating

Investing is one of those things that you should have learned at school but didn’t. As a result, people are lacking financial literacy and, consequently, the confidence to start investing. According to a survey by public.com and Finimize, more than 60% of people said they didn’t learn about investing until after college. One fourth of the respondents said they weren’t sure which resources to financially educate themselves with. Additionally, 17% said they don’t have the time to educate themselves and 14% said they feel like the concepts are too complex. That is why heyfina is on a mission to break down all barriers to investing starting with financial education that doesn’t make you yawn.

The heyfina app will offer a range of short bite sized modules that teach you all the financial know-how so you can start investing and make your money work for you. 

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