What is Stopping Me From Investing my Money??

Investing Anxiety

My friend Ann said, “What I want to know is: What is stopping me from investing my money?”

Ann is not alone. A Nationwide Financial survey found that more people are afraid of investing in the stock market (62%), than are afraid of death (58%), or public speaking (57%.)

Daniel Kahneman, psychologist and winner of the Nobel Prize in Economics, gave advice on this topic in his book Thinking, Fast and Slow. Kahneman gave this sermon to fictional character Sam:

“I sympathize with your aversion to losing any gamble, but it is costing you a lot of money.”

Kahneman advised, “You will do yourself a large financial favor if you are able to see each of these gambles as part of a bundle of small gambles and rehearse the mantra that will get you significantly closer to economic rationality: you win a few, you lose a few. The main purpose of the mantra is to control your emotional response when you do lose.”

The author did not condone reckless gambling. He had three limits on his “win a few, lose a few mantra.”

• Diversify. The gambles have to be independent of each other. “…it does not apply to multiple investments in the same industry, which would all go bad together.”
• Don’t bet the farm.  The gamble should be small enough so you are not worried about a significant loss to your wealth. “If you would take the loss as significant bad news about your economic future, watch it!”
• No long shots.  This mantra doesn’t apply to long shots which he described as “the probability of winning is very small for each bet.”

Kahneman said you have to have emotional discipline to follow the above rules. But his main point is that you should see each decision as one of many small decisions in a portfolio.  Emotional distress can also be reduced by cutting back on how often you check how your investments are doing.

Related Blog Posts

“How to Handle Emotions When Making Investment Decisions”

“When to Trust Your Intuition or Gut Instinct When Making Financial Decisions”

“How the Heck Do I Invest my Money?”

Sources

“Nationwide Financial Survey Finds Fear of the Markets Trumps Fear of Death”

“Thinking, Fast and Slow” by Daniel Kahneman, pages 338-339

Book Review: “What if…Workbook: Give the Gift of Preparedness to Your Loved Ones

Now that fall is here, many of us are dusting off our neglected to-do lists. For those interested in organizing their financial information, Gwen Morgan has put together a handy fill-in-the-blank guide to “putting your affairs in order.”

PUT YOUR DUCKS IN A ROW! (Click to Enlarge)

The workbook guides an individual or family as they assemble their important information in one place. This helps us by:

• Making it easier to find information when we need it
• Helps someone forced to take over in an emergency

After losing her mother to Alzheimer’s, Morgan realized she didn’t really know how her mother wanted her to handle many decisions, including planning her funeral service. She thought a guide would help loved ones carry out a person’s last wishes.

I like the workbook and think it has value even if a person isn’t ready to record all of his or her “last wishes.” Even people who are more organized than usual will appreciate the prompts for information.

Take Care of the Little Ones (Click to Enlarge)

Space is provided for:

•  A page to rip out to send to two people to tell them where your workbook is.
• Personal Information
• Contact information for loved ones
• Contact information for household matters such as utilities, attorneys, medical and friends. There’s even a section for important information on dependent children.
• There are pages for financial accounts such as banking, brokerage, mortgages and other loans, insurance, document storage.
• Family medical history. This is helpful to an individual in an emergency. But it also can be helpful for the rest of the extended family to have a record of medical conditions that run in the family.
• Personal Last Wishes.  A lot of space and suggestions are given for detailed instructions.
• Gifts for loved ones. This can save a lot of family arguments!

Gathering Together Important Information Helps the Whole Family (Click to Enlarge)

You can find information on the guide at http://www.whatifworkbook.com