Welcome to Finance and Fury.
Things seem to be calming down – markets have recovered somewhat – the US election volatility has been minimal – may see some short-term movements this week
This episode – How to overcome investment uncertainty and start investing!
The truth is that if now is a good time to invest comes back to time scale –
- Nobody can tell you if it is a good time to invest today compared to tomorrow – probability is almost like flipping a coin
- As you expand the timeframe out – probabilities of being up increase –
- One month – probability goes up slightly – 60/40
- One year – 75/25
- 10 years – 100/0
- That is why investing is for the long term – when looking at if now is a good time to invest – the question should be is now a good time to invest compared to 10 years in the future
Given that if done well – investing today can likely put you in a better position in 10 years time – What stops people from investing?
- The common reasons I see –
- Fears and misconceptions – investing is dangerous, get rich quick
- These are some driving factors for uncertainty
- Not knowing what to invest in
- Not knowing how to invest in it
- Not knowing the benefit of it
- Not having enough to invest
- Fears and misconceptions – investing is dangerous, get rich quick
- The last one is a self-determinant from the previous 4 – And a form of financial procrastination creeps in through having uncertainty – then over time – if you never invest or save funds – you wont likely ever have enough to invest
- If you fear, don’t know, what, how or why, then you won’t allocate any resources (money) to it
- If you don’t know what to do, or how to do it, then you aren’t likely to bother
- If you don’t know the benefit – of realising that at some point – you will need to give up working
- There can also be uncertainty about how much you will need to have and when you need it by –
- Look at retirement – if you are uncertain – and then get certainty – that can be daunting
- if you think something is a long time period off, or if it is too large a value, you may procrastinate as well –
- Why invest for retirement in 30 years? What is the point of trying to save a $110k deposit for a home?
- Most things that become larger – also become harder for us to achieve – $110k seems like a lot – but $70 per day for 4 years – at cash rates
- Uncertainty is a part of life – there is always going to be uncertainty – not just when it comes to investing –
- Those little questions that leak into our self talk – should be take a new job? Should we buy a particular house?
- This level of uncertainty – and not working through it can lead to procrastination
- Procrastinating is a part of humans and creeps into our lives without really consciously thinking about it. One of the worst parts about procrastinating is that we justify this behaviour as well using some very clever tricks:
- Avoidance and distractions – Looking for other tasks to do instead of taking action on what we need to.
- Blaming – We external events as the cause of why we delayed in doing a task.
- Denial – We can tell ourselves that what we are doing is more important now, or that we will do what we need to do tomorrow.
- Comparisons – Other people haven’t gotten round to do this, so why should we?
Uncertainty can lead to procrastination – and it can provide a good self excuse – if we are uncertain we can convince ourselves that not doing anything is the best option – which it sometimes can be – but if then the decision is delayed or the uncertainty is not turned into certainty – excuses can come in – while these may make us feel better in the short term, all that they do is delay the inevitable pain we will feel
- Beating ourselves up mentally – not getting to where we wanted
- Retiring with very limited options in income
Achieving any tasks comes in a few phases – The first is having a goal, then uncertainty will come into it – then a plan can be put into place – but procrastinating can get in the way of taking action at any stage
Acting first – saves pain – why an action plan is important – Make an action plan – Members section of the website – have a lot of workbooks, calculators to help
The longer we delay, the greater the pain we feel from procrastinating – in addition – the more we over think a situation – the greater the levels of uncertainty can be – information overload and decision fatigue –
However, the longer the time is away until we absolutely must take action, the less pain we feel delaying. It is funny however, as generally as soon as you go over the breakeven point you will see that taking action isn’t that painful at all.
Have you ever had a small task to complete, delay it for a few weeks then when you get around to doing it, it only takes you 10 minutes? So the act of delaying causes more mental pain in most cases than just taking action.
How to get over any hurdle for investing?
- Is it the first one – Fear and misconceptions = making a bad investment – should be afraid of – I would be – a double or nothing investment – but that is gambling and not investing
- If you have been listening enough and understand how investing works – hopefully not an issue
- Last one – not seeing the benefits – pretty easy to overcome
- Not knowing how to invest, or what to invest in – have someone help – or ask someone who has done it, or resources on FF (what to invest in) – youtube
- These all can help reduce uncertainty and know that what you are doing is correct
Not having enough to invest – and due to having a large target to hit, or it being too far off
What to do – Follow your action plan without thinking or delaying – plus reward of action immediate through temptation bundling.
- sounds fairly easy to just ‘follow the plan’ however it takes some habits to form around this
- Give self instant reward – something to build a habit loop = The concept behind this option is to only do what you love while doing what you are procrastinating about. The reason this has been proven to be so effective is that you are rewarding your present self for taking action to benefit your future self.
- This reward can also be something more tangible, such as giving yourself a treat for completing a task –
- Opportunity cost – what would have you done with the money saved? Bought clothing? Gone out ? Reward self with one once target met
- Once you get into a plan – follow it until it no longer works for you
- Have an accountability buddy
How to make this stick?
Make an action plan – Members section of the website – have a lot of workbooks, calculators to help –
Once you have your action plan in place, see what works for yourself between implementing rewards or consequences.
From there, habits need to be formed around this as part of your daily routine. Habits are formed as your brain has a lot to think about, so if we do an activity for a little while, our brain wires it to become a habit so we don’t think about it anymore. However bad things creep in, like procrastination over time.
When it comes to if now is a good time to invest – compared to next month – maybe not – compared to 10 years – very likely so –
If you have a lot of cash saved up and want to invest – can DCA instead –
Thank you for listening to today’s episode. If you want to get in contact you can do so here: http://financeandfury.com.au/contact/