You may or may not consider yourself a savvy investor.  But you do consider yourself a “safe” investor.  You have money stashed away for a rainy day, your kid’s education and your own retirement.  And you don’t take “risks”.  You want to know that money will be there 5, 10, 20 years from now.  So you stick your rainy day fund in a bank checking account, the kid’s education fund in a bank’s savings account and your retirement fund in a guaranteed investment contract fund.  

No risk. Your money is safe, as long as you still believe in the U.S. Banking system and the Federal Deposit Insurance Corporation (FDIC, you know, the people who insure you bank deposits up to $250,000).  The bank might even give you a little interest every month.  You can sleep at night. 

Unfortunately, your wealth is not growing.  Bank interest rates are historically low.  According to a recent Bankrate.com survey, the national average interest rate on a bank checking account is just 0.11% with the best being just shy of 1%.  This is hardly anything to get excited about.   

Even more worrisome, one has to consider the effects of inflation.  Inflation slowly erodes your purchasing power by making products more expensive over time.  Currently, inflation is running at approximately 1.4%.  If you throw in food, oil and gasoline, it rises to about 2.7%.  It gets even worse when you factor in taxes.  So, by keeping money in the bank or a retirement guaranteed investment contract fund, you are locking in a loss of anywhere between 1.5% and 2.5% every year! 

Therein lays the fatal flaw of believing you are a “safe” investor.  By locking in low interest rates, you are losing money to inflation each and every month.  Can you really sleep soundly at night knowing your wallet is slowly being emptied out at the same time?    

So, why do people decide to either postpone saving or keep the majority of their savings in cash when they know that the best way to ensure a prosperous life is by investing in a combination of stocks, bonds and cash?  

 

F.E.A.R.

According to a July 2013 survey conducted by Harris Interactive on behalf of Nationwide Financial, Americans are more afraid of investing in the stock market than they are of losing their jobs, public speaking and even dying. 

So what creates these emotions and feeling towards the markets?  Here is our top seven list of why people fear the stock market: 

  1. the economy is bad  ….  and getting worse  ….  And will forever
  2. the market is rigged by  ….   evil bankers, computers, etc., etc., etc.,
  3. it’s gone up fast  ….   and it’s going to crash ….  right after I put my money in it
  4. it’s going down  ….  and it’s going to keep going down …. forever
  5. the average investor doesn’t have a chance  ….   ever
  6. I don’t know anything about stocks or bonds  ….  and I never want to
  7. I’ve been burned by the “market” before  ….  and I’ll never trust it ever again 

 

All of these reasons for being afraid of investing in the market are valid !!  These are your feelings and represent how you perceive the market.  Your perceptions are your reality.  And, according to Albert Einstein, “Reality is merely an illusion, albeit a very persistent one”. 

And persistence is key in creating our perception of reality.  Take a look at the financial cable T.V. shows or the headlines on financial websites.  A continual stream of dread, doom and fear mongering.  All written in bold, HUGE FONT, CAPITAL LETTERS (isn’t that screaming in the textverse?).  Headlines such as “Yes, stocks are rigged and Fed is the biggest rigger”, “New doomsday poll: 99.9% risk of 2014 crash”, “Crash of 2014: Like 1929, you’ll never hear it coming”, “European banks still pose global risks”, “The market’s rigged, you say? When wasn’t it?”  “Don’t try calling this jobs market normal”, and on and on and on …. All designed to catch your attention and manipulate your emotions and perceptions of the stock market and economy.      

Think about the reality you are living in now.  Who wrote that reality?  Is it yours or was it built on the view of others; the media darlings?  Maybe your friends, coworkers or neighbors?  Aren’t they also being inundated with the same media information you see?  The story you are hearing, that stocks are bad and dangerous, IS detrimental to your future financial life and will, more than likely, keep you from realizing your future dreams.  It could very well mean the difference between living in your own home in retirement or being forced into a retirement home.     

Your next step is to begin with making a conscious decision to be in charge of your own perception.  You, and only you, own your future.  If you don’t, trust me, someone will always be there to “help” you create your perception.   

So, how can you take control of your perception?  Our next blog series will focus on recognizing and understanding why we fear and mistrust the financial world, define what “safe investing” really is, and, finally, techniques you can use to manage your fear of investing in the market.  

Don’t get me wrong, there are no “cures” to these fears.  It’s impossible to escape the media static you encounter on a daily basis in the digital age in which we live.  The best you can do is to minimize the static and tune into your inner strength and determination to live your life prosperously.