Rule #1 Finance Blog

With Investor Phil Town

How to Overcome Your Fear of Investing in the Stock Market

If you’re new to the stock market and have a fear of investing, don’t worry because you are definitely not alone.

Most investing beginners associate investing in the stock market with intense feelings of fear, stress, and anxiety. While you may reservations about getting started, that shouldn’t stop you from investing in the stock market altogether.

In fact, the longer you wait to start investing, the more opportunity you miss out on to grow your wealth and achieve financial freedom for yourself.

So, let’s cover some of the most popular excuses for not investing and how you can overcome the financial fears behind them.

Cheat Sheet for Smarter Investing

Where Does Investing Fear Come From?

Plain and simple, fear of investing comes from not knowing what you are doing.

Investing in anything, especially the stock market, when you don’t have a concrete game plan can be scary. It’s a serious journey that shapes your life and can lead you to live a life free from financial burden.

For example, if you don’t have a solid amount of money to retire on, 20 or 30 years from now the government may not have the funds available to support your lifestyle, which is scary.

That is why it is becoming increasingly more important to learn how to handle your own money.

In reality, the only fear of investing you should have is the fear of what you will miss out on if you don’t invest.

As long as you know what you’re doing, there’s nothing to be afraid of.

Don’t let fear get in the way of your taking advantage of the huge opportunities the market offers for wealth and financial security.

Top 5 Investing Fears and How to Overcome Them

Now that you understand the beneficial impact investing can have on your life, let’s dive a little deep into some of the most popular excuses people give when they are afraid of investing in the stock market.

Do any of them sound familiar?

If so, you’re in luck. We’ll look at why these fears are myths and how you can change your fears into productive action.

Investing Fear #1: “I’ll Lose all my Money in the Stock Market.”

People who say this believe that the market is risky and that nobody ever beats the market.

The truth is that plenty of people do beat the market.

Warren Buffett has been crushing the market for 60 years. Investing in companies is not risky if you know what you’re doing.

That means learning the steps you need to follow to find great companies that are worth investing in — and then following those same steps, again and again, to keep on finding more great investment possibilities. It’s a formula that keeps on paying off.

Investing Fear #2: “I’ll Never be Able to Retire.”

Do you ever worry that you’ll have to keep on working for the rest of your life?

When people believe this, it’s because they don’t really understand the power of compound interest. Albert Einstein, who understood a lot of things, called compound interest the “eighth wonder of the world.”

The math behind compound interest may be complicated, but the results are clear — and awesome. Here’s an example:

Say you invest $10,000 at an interest rate of 6% per year. At the end of the 12th year, your money will have doubled. Then, if it keeps on earning at the same interest rate, it will continue to double every 12 years. So by year 24, it will have doubled and doubled again. If you’re investing for 30 years, then your $10,000 will grow into $60,000.

If your rate of return is higher than 6%, then your money will grow even faster. This is where the results get really spectacular. At a 15% rate of return, your money will double every five years — and in 30 years, you will end up with $640,000 — all of it from your original $10,000.

What this means is that if you learn to invest wisely, buying great companies at great prices, and you give yourself enough time, then the power of compound interest will create a larger retirement nest egg than you might expect.

Investing Fear #3: “The Stock Market is Going to Crash!”

Are you afraid that you will lose all your money in a stock market crash?

Rule #1 investors know that crashes are actually opportunities. The key to investing in the market without fear is to learn to recognize those opportunities when they arise. Then use that knowledge during a crash to find wonderful companies that are on sale at bargain-basement prices.

When the market goes down, it will come back up. When you buy great companies during a crash, just hang tight, and you will reap the reward when the market goes up again.

Investing Fear #4: “I’ll Never Get Out of Debt.”

If you’re deeply in debt, you may be afraid, like many people are, that you’ll never be able to dig your way out of it.

But that’s not true. You can manage your debt and pay it off.

It just takes time and self-discipline. Start by making a promise to yourself that you will pay it off. Then make a plan. Every time you get a paycheck, make a payment on your debt before you spend the money on anything else.

Investing Fear #5: “A Catastrophic Event will Bankrupt Me.”

Do you worry that a health emergency will force you to go into bankruptcy?

You don’t need to worry if you’re prepared. Get great health insurance, and that will help ease your mind. If you’re really worried, you can also buy supplemental insurance. And it’s always wise to have an emergency fund set up so that is financially prepared to deal with whatever may come up in your life.

3 Simple Steps to Overcome Any Fear in Investing

Still not convince investing is for you? If you still have some lingering fears about starting your investment journey, the same basic principles apply.

  1. Knowledge: Know what you are doing
  2. Preparation:  Be prepared for emergencies
  3. Action: Act on your knowledge when the time is right

Learning how to invest and understanding what you’re investing in WILL give you the confidence that you need overtime to start putting your money into the stock market.

Use your rational mind to work through and dispel your fears. It’s never good for an investor to be afraid.

Fear causes you to make mistakes and to miss great opportunities. Knowledge, preparation, and action will put you on the right path to security and wealth.


Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.