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Six Lies that Stop Us from Investing in Financial Freedom

1) I need a lot of money to open an investment account.

Truth: There are many banks and brokerage houses that require no minimum balance to start.

The only thing needed to begin investing is an online trading account, also known as a cash management account.

After the stock market crash of 2008, many retail banks merged with large institutional brokerage firms. As a result, many retail banks now offer brokerage services. Opening an online trading account can be as easy as contacting a customer service representative at your current bank. Depending on the amount of money you have across your accounts, your bank may offer discounts and incentives to open a new online trading account. For example, many banks offer free cash back or a certain number of free online trades per month, which can save you money. Click here for a list of retail banks that have brokerage accounts. Before making a final decision, ask about fees such as the cost per trade and monthly account maintenance fees.

2) I don’t have time to pick investments

Truth: There are many alternatives to individual stock picking. For investors who don’t have time to research companies, investments such as mutual funds and Exchange Traded Funds or ETFs provide excellent and often better returns than individual stocks. A list of index ETF’s that track the DJIA can be found using NASDAQ’s ETF Screener. Check What are index funds, mutual funds and ETF’s for a more detailed explanation.

This is the same excuse we use for not exercising, not going to the doctor, and many other necessary tasks we put off in our daily lives. If this is what’s holding you back, I’d recommend investing in an index ETF such as DIA or IYY. An Index ETF, is an ETF that closely follows an index such as the Dow Jones Industrial Average (DJIA)NASDAQ or S&P 500. Index funds contain top performing companies that have a strong history of providing good returns on investment.

Investing in an Index ETF can provide diversification across industries similar to some mutual funds. Studies show that an ETF generally outperforms its mutual fund peers. ETFs have less management fees than mutual funds and can be quickly sold just like a stock investment in an individual company. Liquidity is an important concern for female investors because we tend to have a lower tolerance for investment risk compared to men. During the stock market crash of 2008, many investors who held investments in mutual funds lost thousands of dollars within hours, because mutual funds can only be sold after the close of the trading day.


3) I have to watch my investments daily

Truth:  Assuming you have a 401K or another type of retirement plan, do you check that daily? If you’re like most people, the answer is, probably not. Checking your investments on a quarterly basis should be enough for midterm and longterm investors.

Active investors and traders known as day traders and swing traders watch their investment accounts because they are constantly studying securities and looking for trading opportunities to make quick profits every day. As a long-term investor, you should not have to check your accounts daily because you are holding quality investments for a long time. While leaving your account completely unattended is not recommended, you don’t have to monitor it daily.

If you are concerned about losing profits during times of extreme volatility, you can place an automatic instruction called a sell stop loss. This instruction will automatically sell your investment if the stock goes below a price you specify. On the contrary, if you are interested in buying a stock at a specific price, you can also place an automatic instruction called a buy limit order. Depending on how your investment is performing, you can adjust the sell or buy price as market conditions change.


4) The stock market is difficult to understand

Truth: It takes some time and effort to learn the stock market, but it is not difficult.

The key to understanding the stock market is to begin by learning about businesses and industries that are easy for you to understand. Since the beginning of the stock market, financial professionals created terminology that made the stock market appear more difficult than it really is. Like many other subjects, if you are consistent you can decode the stock market. In the event you still find the stock market difficult to understand, hire a trustworthy financial planner or investment advisor to educate you on your investment choices.

5) I don’t know which investments to pick

Truth: Every person has knowledge and skills that can be used to make great stock picks.

As a beginner investor, its okay to be uncomfortable with picking investments. If you decide to venture out into picking stocks rather than investing in an Index ETF, start by investing in products, services and companies that you know or use regularly. Every person has knowledge and skills within a particular industry that can be used to understand the growth and profitability of an industry. Do you work in retail and have information on trends? Maybe you’re a nurse who knows the preferred medicine hospitals use to heal a widespread sickness? Are you a procurement specialist with deep knowledge of specialty products? Do you shop at Amazon? Do you have a favorite lotion, detergent, airline or car manufacturer? All of this information can provide insight on popular products and services from profitable companies that you are excited to learn about and invest in.


6) The stock market is like gambling in Las Vegas

Truth: Investing in the stock market is nothing like gambling.

When a person gambles they exchange money to participate in a game of chance. The gambler gets nothing in return for their participation other than the opportunity to win. The gambler is relying on sheer luck and probability, which is not in their favor.

On the other hand, an investor in the stock market is buying a stock or group of stocks that have value. The value of the stock priced every day in an open market where buyers and sellers determine the fair value of that company.

When you purchase equity or buy shares in the stock market, you receive a slice of a company that has a current value and future value. A share of stock entitles you to a portion of the future cash flow created by the company’s business operations. If the company successfully executes its business strategy and remains profitable, the future value of the company grows. As an investor holding a share of stock, the benefit you receive will be in the form of a higher stock price. The company may also pay out a portion of its profits to you as an investor in the form of dividends.

Final Takeaway: It’s never too late to begin investing. Let’s claim our financial freedom today!