Why Does Investing Make People So Anxious?
Useful survey out of Canada that would probably also have similar results in the United States:
The study found nearly all Canadian investors (97 per cent) feel anxiety when thinking about their investments. When thinking of investing and making investment decisions, Canadians are most worried about:
— Fear of financial loss (47 per cent overall; 43 per cent for men and 50 per cent for women).
— Not receiving a ‘good’ return on their investments (40 per cent overall; 39 per cent for men and 41 per cent for women).
— How market volatility will affect their investments (33 per cent overall; 29 per cent for men and 37 per cent for women).
— Selecting the ‘right’ investments (32 per cent overall; 32 per cent for men and 31 per cent for women).
You might ask your students the steps/strategies they could develop to overcome these anxieties, including:
- Recognition that markets rise and fall but over the long-term stocks beat bonds and savings accounts which offer the promise of safety but at the cost of lower returns.
- Discuss what is meant by a “good” return on investments. Too often, we focus on relative returns, e.g. how our neighbors have done vs. return that could be expected based on our asset allocation or risk tolerance.
- There are thousands of investment alternatives out there; in most cases, the simplest portfolio of several low cost index funds (US Stock, International Stock, Emerging Markets and Int. Term Bond Fund) will beat most portfolios.
- Use dollar cost averaging to avoid the potential regret of making a large investment in the markets at the wrong time.
About the Author
Tim Ranzetta
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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