Investing is one of the most important things we should do as part of our daily lives, yet such a small proportion of people do it and even fewer do it well. For those that do, a large proportion of them start late a miss out the opportunity for their to compound.

It doesn’t matter what background you come from - finance, business, sociology or even medicine - the likelihood of you investing is hardly influenced by your educational background. I know many people who have studied finance have yet to dip their toes in the financial markets. What matters most in my opinion, is having a mindset to achieve a certain financial goal. Having a target in mind keeps our spending habits in check and keeps us driven to find out more about what is available out there.

After speaking with some friends, here are some of their most common reasons.

I Don’t Know How To Start

If you’re someone who has been using this excuse for the longest time - I’m sorry. This excuse isn’t applicable in the 21st century as we live in an information age and armed with the most powerful tool - the Google Search Engine - and available to us at our fingertips.

For god’s sake, pick up your smartphone and Google “How to start investing in <insert your own country>”.

I Don’t Know Where To Start

Investing can be confusing as there are so many different asset classes and different individual assets to invest in within those asset classes. For starters (especially if you’re young), I’d suggest to just focus on two asset classes:

• Stocks
• Exchange Traded Funds (ETFs)

First, stocks. Stocks represent ownership in a company. Companies issue shares (synonymous to stocks) to raise money to grow their business. Owning shares in a company means that you have equity in the company – which also means that you have a stake in the company.

The fundamental reason one should invest in a company is because you believe in the company’s business and more importantly, the value that they bring to the world. For example, I invest in Tesla because they are the leaders in the Electric Vehicle (EV) space with a clear edge in their autonomous driving technology. It’s impact stretches across not only the automobile industry, but also in the renewable energy and technology space.

Going back to how investment works - You give the company some cash in exchange for ownership in the company, and in return you are able to participate in the returns (in terms of increase in share price) of the company.

The question then is: Which company’s shares should you invest in?

This step is usually the biggest deterrence to most beginners. The truth is – unless you spend enough time doing research on a company, you’ll never be able to understand it sufficiently enough to invest in. That is why most people defer their investment decisions to robo-advisors or wealth managers. The truth is – most fund managers and even the so-called “wealth-gurus” underperform the market index. As a man-on-the-street investor, we are better off investing in an ETF.

What in the world are ETFs?

Well, ETFs are essentially a basket of stocks. They are a great form of investment because it allows us to gain exposure to a variety of stocks, giving us a more diversified exposure without the hassle of actively managing our portfolio.

There are many different ETFs that track indices or sectors or asset classes. The most popular one is undoubtedly SPY which is an ETF that tracks the US S&P500 index.

In fact, I think dollar-cost averaging into ETFs is a simple way to get started on your investing journey. For Singaporeans, using robo-advisors to invest your CPF monies is also a good way (but that’s another topic for another day).

I’m Scared Of Losing Money

It is only natural that investments bear risk, otherwise people would just stash money under their beds, right?

The right question to ask yourself here is: How much am I willing to lose (as a portion of your initial investment)? In the finance world, this is also known as risk appetite.

Assets (like stocks and bonds) are typically categorized into different risk categories. Here is my breakdown of the riskiest to less risky assets:

• Derivatives
• Cryptocurrency
• Stocks
• Exchange Traded Funds (ETFs)
• Bonds

To any new investor, just think of risk (loosely) as “how much and how fast can I potentially lose” on your initial investment. Of course, with high risk comes high returns. The key to good investment is to have good risk management, which is to:

1. Do your own research before investing into anything and
2. Invest in companies that are fundamentally sound

Having a peace of mind is often key to successful investing. The bottom line:

Only invest in things you understand and believe in.

The Real Reason Why Most People Don’t Invest

All the above reasons (or excuses as I like to call it) are indeed deterrences for people to invest. However, the main reason and the real reason why most people don’t invest their money boils down to just one thing: Laziness.

We are only human. Why learn to invest when we can watch NetFlix or spend time playing games or catching up with friends? Why learn about cryptocurrency when we can watch a movie or laze in bed doing absolutely nothing?

The answer?

Delayed Gratification. It is simply not human nature to resist impulse but to take an immediately available reward. Learning anything for that matter has large upfront costs but also has the potential to pay off handsomely in the future. That is why we learn things in the first place. Learning how to invest is no different.

Personally, the reason I invest is because I know the value of it and how much and how fast money can compound over time. More importantly, I want to be financially free so that I can do the things that I love and spend time with people that matter to me. I want to be able to freely give to those around me and help improve the world a little every day.

Why You Should Invest

Opportunity Cost

I have this belief that if people know what they’re missing out on, they would be a lot more keen to learn how to invest.

Let me pitch this to you.

Imagine you are a fresh graduate out of college. You hustle hard everyday, working from 9am to 9pm. You saved diligently every month, scrimping on food and extracting the best value of your every dollar spent. You work hard for the next 20 years of your life but because of you hustle everyday, you neglect making any investments.

Let’s compare two scenarios - one with investment and one who without - with the following assumptions:

• 4% rate of return
• 10k savings per year for 20 years

In 20 years, the person that did not invest his/her money would have amassed 200k while the person that did would have amassed ~300k. That is a whopping 50% more!!!

The main takeaway: the time value of money increases the opportunity cost of every dollar spent NOT investing. Of course, I’m not telling you to put every single dollar into investment, but rather informing you that starting your investments early is extremely powerful because of how compounding works. The opportunity cost of not investing is far too great to be neglected.

This, I believe, is the single most important factor why everyone should invest.

Closing Words

A final and most important piece of advice to anyone who hasn’t started investing:

Just. Get. Started.

Do you invest? Let me know why or why not in the comments section below and I’ll make it a point to reply every single one of you :)

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