Investing has risks, but that doesn’t deter rich people from putting their cash into the stock market. Historically, investing was more accessible to those with lots of money, but today, people can start investing in stocks even with little money. If the stock market can give profitable returns, how come everyone doesn’t invest in stocks?
Not everyone invests in stocks because they assume that they need a lot of money to invest, even though this activity is profitable. Those who can’t save may not have enough money put aside for investing. Since profits aren’t guaranteed, not everyone is willing to risk their savings.
Assuming one can save a little money, other reasons might include fear, confusion, distrust, and the inability to attain the correct mindset needed to invest in the stock market. Let’s take a closer look at this topic below.
IMPORTANT SIDENOTE: I surveyed 1500+ traders to understand how social trading impacted their trading outcomes. The results shocked my belief system! Read my latest article: ‘Exploring Social Trading: Community, Profit, and Collaboration’ for my in-depth findings through the data collected from this survey!
Table of Contents
Reasons People Don’t Invest in Stocks
There are many reasons people don’t invest in stocks. Below, I’ll share the common reasons many people choose not to invest in stocks and bust some myths regarding stock investing.
1. People Assume That Stocks Aren’t Affordable
Surveys have shown that most people feel that they can’t afford to invest. As per a report published by CNBC (link in article sources), only about 39% of Americans feel they have enough money in the bank to cover emergencies, which is why the number of people who feel they’re able to save for retirement is so low.
2. Stock Investing Involves Risks
You’re never guaranteed to make money in stocks, and you could even lose money. That alone is enough to discourage some people from investing in stocks.
Since many people struggle to save enough for emergencies, many think investing in stocks is beyond their reach. People with unstable finances are less likely to risk losing any extra money they have.
3. They Can’t Handle Market Fluctuation
Someone who panics when they see the market take a dive might have a hard time investing in stocks. The market fluctuates over time, but it usually will go up in the long run. It can be hard to watch this happen if one can’t afford to be broke, even if it’s temporary.
To be a good investor, one needs to learn to stay calm and buy and sell without using emotions as the prime motivator.
4. They’re Afraid of Losing Money
Many people view the stock market as an endless pit that’ll take all of their money and give nothing in return. Fear is what causes many people to stay away from stock investments, as they’re afraid they’ll lose everything.
5. Not Everyone Is Patient Enough To Learn
There’s a lot of information available because of the internet, but sometimes that can make specific subjects even more confusing. It’s no secret that knowing the ins and outs of the stock market can be a daunting task, especially when everyone seems to be selling the next get-rich-quick scheme.
Even though we have access to limitless information, not knowing where to start or which direction to go can keep things confusing even if we try to understand. While many may try to give themselves a chance to learn, many may give up out of frustration.
Understanding that the market fluctuates in both directions and what companies to invest in can be daunting.
For example, when a company is doing poorly but you know they’re about to release a new product that you suspect will be popular, it may be a good time to invest in that company’s stock.
Trading in the stock market is a hard job. It’s emotional and stressful in a way that very few people can deal with. Anyone possesses the ability to invest in the stock market with a little bit of money, time, research, and dedication and can be profitable when they do so.
6. They Don’t Trust the Stock Market
Not everyone trusts the stock market, and there are valid reasons for it.
Over the years, stories of companies such as the collapse of Enron, movies such as The Wolf on Wall Street, and financial scandals revolving around the stock market have created an environment that discourages people from investing in the stock market.
Many people don’t trust the data provided to them, and they don’t trust that the other people involved in trading stocks are fair. Due to trust issues, many people avoid getting involved in stock trading.
Anyone willing to take risks, spend time doing proper research, and attain the needed mindset can have great opportunities awaiting them. If they trust the process, learn the terminology and some of the basic ins and outs of trading in the stock market, excellent reward potential could be right around the corner.
People Don’t Even Invest in Index Funds – Why Is That?
Not everyone invests in index funds because although they’re diversified and low-cost, they prevent investors from seizing larger opportunities one might find elsewhere. Generally, index funds performance matches that of the stock market, but they don’t provide much protection if the market crashes.
What Is an Index Fund?
An index fund is a type of exchange-traded fund (ETF) or a mutual fund representing different securities within a specific index. The S&P 500 is probably the most well-known index, but indexes exist for nearly every market. Index funds provide investors with an opportunity to track the performance of such indices.
Index funds may be purchased through an index fund provider such as Vanguard or Blackrock.
Can an Investor Create an Index Fund?
An investor can create their own index fund if they believe they can better put one together than the already available indexes. By creating your own index fund, you can harvest losses and use them to offset gains elsewhere.
The point of taking advantage is that it gives you the ability to use those losses to offset some of your taxable income. This is something that index fund providers usually get to take advantage of themselves instead of the investor purchasing the index fund from the firm.
Can a Poor Person Invest in Stocks?
A poor person can invest in stocks, thanks to modern technology. One may read a book, watch YouTube videos, or read online articles to learn investing basics for free. Plus, many investing platforms today offer mobile apps that make investing more convenient than ever.
Investing used to be more difficult for the average person, as they need a significant daily minimum to invest in stocks. A considerable amount is still needed on many platforms, but not all of them.
Today. there are trading platforms such as Robinhood, Vanguard, TD Ameritrade that make investing affordable. There are also platforms free of trading fees, allowing potential investors to invest as little as $1.00 in the stock of their choice.
So, does that mean even a poor person can invest in stocks?
If a person can order food, a ride, or a date, they might benefit from realizing that it takes a very small amount of money to play around with and get started.
Can You Invest in Stocks at Any Age?
You can invest in stocks at any age, as long as you’re 18 or older. If you’re underage, you can have your parents or guardians open a custodial account for you. Typically, you need to be 18 or 21 years old to invest, depending on the laws of your state.
The reason you can only invest on your own when you’re at least 18 is that buying stocks involves a legal contract of which you must be able to assume responsibility.
Author’s Recommendations: Top Trading and Investment Resources To Consider
Before concluding this article, I wanted to share few trading and investment resources that I have vetted, with the help of 50+ consistently profitable traders, for you. I am confident that you will greatly benefit in your trading journey by considering one or more of these resources.
- Roadmap to Becoming a Consistently Profitable Trader: I surveyed 5000+ traders (and interviewed 50+ profitable traders) to create the best possible step by step trading guide for you. Read my article: ‘7 Proven Steps To Profitable Trading’ to learn about my findings from surveying 5000+ traders, and to learn how these learnings can be leveraged to your advantage.
- Best Broker For Trading Success: I reviewed 15+ brokers and discussed my findings with 50+ consistently profitable traders. Post all that assessment, the best all round broker that our collective minds picked was M1 Finance. If you are looking to open a brokerage account, choose M1 Finance. You just cannot go wrong with it! Click Here To Sign Up for M1 Finance Today!
- Best Trading Courses You Can Take For Free (or at extremely low cost): I reviewed 30+ trading courses to recommend you the best resource, and found Trading Strategies in Emerging Markets Specialization on Coursera to beat every other course on the market. Plus, if you complete this course within 7 days, it will cost you nothing and will be absolutely free! Click Here To Sign Up Today! (If you don’t find this course valuable, you can cancel anytime within the 7 days trial period and pay nothing.)
- Best Passive Investment Platform For Exponential (Potentially) Returns: By enabling passive investments into a Bitcoin ETF, Acorns gives you the best opportunity to make exponential returns on your passive investments. Plus, Acorns is currently offering a $15 bonus for simply singing up to their platform – so that is one opportunity you don’t want to miss! (assuming you are interested in this platform). Click Here To Get $15 Bonus By Signing Up For Acorns Today! (It will take you less than 5 mins to sign up, and it is totally worth it.)
Conclusion
While stock investments are open to anyone at least 18 years of age, not everyone will want them. That’s because investing in stocks involves risks, which not everyone is willing to take, especially when they’re struggling to make ends meet.
You’re never guaranteed to make money in the stock market, and you could even lose money.
I’m not your financial advisor, so always do your own due diligence before investing. With the right mindset, proper research, and patience, one can potentially see good stock returns. Good luck!
BEFORE YOU GO: Don’t forget to check out my latest article – ‘Exploring Social Trading: Community, Profit, and Collaboration’. I surveyed 1500+ traders to identify the impact social trading can have on your trading performance, and shared all my findings in this article. No matter where you are in your trading journey today, I am confident that you will find this article helpful!
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