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Fear of investment losses

As we have reported, about 50% of Americans own stocks, which is down about 11% over the last 10 years. Most of that reduction in ownership is that people fear that they will lose money if they invest, such as what occurred during the great recession of the late 2000s – early 2010s.

The unfortunate fact is that since the market bottomed out in 2009, the S&P 500 has returned about 330%. While you would have been a genius (or most likely very lucky!) to invest all of your money or start investing  at the precise bottom of the market in March 2009, you would also have been very unwise to sell then due to fear. Stocks almost always appreciate in value over time.

The fear of investing is particularly strong for Americans under the age of 30. According to multiple surveys, including from Gallup, only around 30% of anyone under the age of 30 is investing. That percent is down a number of percentage points as well since the recession, and in fact that age group has had the largest drop in investor activity.

Survey shows that many people fear investing….they fear the market going down like it did in the great recession or losing their money. Many of the 50% plus who due not invest due to this fear as reported by survey, Gallup, Survey Monkey, and other companies. This is what is known as the “Fear of Failure”, when the fear of doing something makes the person not even try. Unfortunately almost all people have this, regardless of their income.

Over the years I have been investing. I have lost a lot of money, but due to what I like to think is all skill (who am I kidding…it involves a lot of luck!) I made more than I lost. I started investing with my paperboy money and the money I earned from working at a grocery store. There have even been some shady companies I have fallen for and been involved with, and ended up being one of the “lead plaintiffs” in a class action lawsuit. You think I would have learned after doing that one time, but no, me the genius investing in 2 shady companies! Both Pre-paid legal services and THQI “conned” me as well as thousands of other investors. One of the lawsuits, against THQ, the class action was able to win, and the settlement benefited thousands of investors.

That was back in 2000, when I was still in my early 20s. At that time, which was also about when the dotcom bubble burst, I was scared and fearful of trying more investments. But I had to gather myself and get over the fear. As I was still so young and knew I would have time to recover from any other losses. So I eventually started to get back involved.

Investing in stocks can be scary, regardless as to whether you are rich, middle income, or struggling to pay the bills. But this feeling of being scary is even more true for many users of this site, whom are low income, struggling to pay their bills or rent, etc. But I strongly believe everyone needs to start somewhere. Even a low income family can often find a few dollars (if they cut an expense or two out or work an extra hour or two or use technology) to invest per week. Then, over time that stock investment will build up per the compounding effect.

Low income families digging up money can be challenging, and I know that first hand too from my background. In addition to the budgeting or maybe extra shift/hour at work, there are phone apps that can help people invest spare change, round up bank accounts, free matching programs that may invest a few dollars and more. It may be hard to free up a few bucks, and is scary, but it can be worthwhile.

Think about risk this way. Per Standard and Poor’s, the S&P 500 index has had a positive return (including reinvested dividends) roughly 85% of the time over 10 years. If you shorten the timeframe, the index has had positive (counting dividends) in over 70% of three year periods. So if your investing window is 10 years +, and history holds true (which history often repeats itself over time), then you have an 85% chance of making money. That should hopefully dispel some of the fear.

But you may say, well, I have a 15% chance of losing money. That fear…fear of even trying is known as the Fear of Failure that everyone needs to overcome if they want to meet their dreams and goals.

It can be tough to get over the fear. I have gone through multiple ups and downs, including 2000 (lawsuits and dot come), 2008 financial crisis, and others. Each time I reflected, gathered myself, studied the risks, tried to put things into perspective, and knew I had to get over the fear and start investing. But then again eventually I did have enough in late 2015 when my body and mind said it had enough!


Jon McNamara is the CEO of needhelppayingbills.com, a company that he started in 2008 and that specializes in helping low income families as well as those who are in a financial hardship. He also found NHPB LLC, a company committed to helping the less fortunate. Jon and his team also provide free financial advice to help people learn about as well as manage their money. Every piece of content on this website has been reviewed by him before publishing and many of the articles he has personally written. Jon is the leading author for needhelppayingbils.

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