Growing up, I always thought that investing was the ultimate way to become rich. You hear of people making thousands just from a small chunk of money and retiring at 25 – sounds ideal right? You may be surprised to know that people opt to stay away from investing… but why?
Investing doesn’t appeal to everyone as it requires upfront funds to get started. There is also a risk that it could go down as growth is never guaranteed. Investing can also take a long time before any substantial gains are made so people often try to seek out faster ways to grow their money.
Trying to work out whether investing is for you? Let’s take a deeper dive into potential reasons people steer clear of investing and whether it would be a deal breaker for you.
Initial Cash Requirement
A big thing that puts people off of investing is that there is an initial cash requirement needed. From personal experience, this is around the £100 mark but this assumes you have more than £100 to invest at a time.
Young people, students and those not as financially strong will likely struggle to have a spare £100 lying around that they can invest.
Additionally, it is common to only get a few percent growth over a few months – if you are looking to invest smartly (rather than gamble on tiny stocks), to get a substantial return, you need to have a substantial amount invested!
Shifting Priorities
It’s not a stretch to assume that many people simply don’t feel that investing is appropriate for where they are in their life.
New parents, although they feel the financial strain of raising a ‘mini-me’ and would love an influx of cash from investments – the only thing that is guaranteed is that raising a child to the age of 18 costs around £110k for a girl and £80k for a boy – I suspect boys don’t spend as much on beauty products… might just be me.
Additionally, us grown up kids – commonly known as ‘adults’ aspire to get onto the property ladder. Those of us that are successful have managed to save up a substantial amount in order to put down a healthy deposit. Of course, this requires a significant amount of cash which is safely put in a Savings account rather than put into investments which will fluctuate on the stock market.
Risk That Investments Will Fall
Probably the biggest worry that ‘would-be’ investors have, is that returns are NOT guaranteed. Investing in a company that later announces a drop in annual profits will mean that the share price will drop and you will be out of pocket.
If you panic and take your money out, you’re going to have to accept this loss and would actually have been better off not investing at all!
This risk can be mitigated through portfolio diversification. Check out my ‘Investing: What Investments Won’t Lose You Money’ to find out the best way to invest without risking your cash.
Making Good Decisions Takes A Lot Of Research
Everyone wants to make the right decision when investing their money – after all, you’ve worked hard for your money so you don’t want to lose any of it, right?
Jumping head first into an investment can be very dangerous – without the appropriate research and investment due diligence, you could be buying into a stock that is just about to nose dive. So what should you do?
Well… research! I’ll do a separate post on investment research but for now, just make sure if you’re buying shares in an individual company, you look at how the share price is moving in relation to recent news published about them.
However, doing this brief research does not guarantee you’ll pick a winning investment – it takes hours upon hours of high quality research to give you that comfort that your money is safe.
Growth Takes Time
The majority of investors are just the average Joe who has heard that there is this thing called Investing and that it could make them rich. What they soon find out is that in order to make these crazy mountains of money – it takes A LOT of time, depending on the amount you invest.
Let’s take a look at how a £10,000 investment performs over a total of 50 years with an average return of 5%:
| Year | Total Interest | Balance | Interest Movement |
| 0 | £0 | £10,000 | £0 |
| 10 | £6,470.09 | £16,470.09 | £6,470.09 |
| 20 | £17,126.40 | £27,126.40 | £10,656.31 |
| 30 | £34,677.44 | £44,677.44 | £17,551.04 |
| 40 | £63,584.17 | £73,584.17 | £28,906.73 |
| 50 | £111,193.83 | £121,193.83 | £47,609.66 |
| 60 | £189,607.39 | £199,607.39 | £78,413.56 |
See how the interest snowballs each decade? It’s gone from earning only £6,470.09 in the first 10 years, to £78,413.56 from 50 years to 60 years… Although I’d love to earn a cool £8k per year (£80k over 10 years) for just letting my investments marinade, you can see the real killer here is the time it takes to get there.
More Attractive Alternatives?
The final reason that people may decide not to invest is simply because there may be more attractive alternatives to spend their money.
This kind of ties into the ‘Shifting Priorities’ but rather than not having the cash spare because they’ve got to pay, say, a mortgage. These people may prefer to live their best life and spend their money poppin’ bottles in the club.
Personally, clubbing has never really appealed to me so I’m perfectly happy putting my spare cash into investments until I find a worthy cause to spend it. However, I wouldn’t blame anyone for taking their cash and spending it on a fancy new car, a nice watch or making some memories with the family.
Summary
In summary, there is a vast amount of reasons as to why investing wouldn’t be for everyone – this includes:
- Not having enough cash to meet minimum investment requirements on some investing platforms;
- Needing to pay off mortgages, spend the money on raising a child or pay off student debt;
- Seeing the stock market as a blackhole that will swallow their money and end up losing their hard earned cash;
- Not having the time to wait for the returns they’ve heard about on the news; and
- Prefer to spend their cash on living their life and enjoying the money with friends and family.