Fear of Stocks

Recently, I shared my 401(k) investment knowledge journey, pointing out my mistakes and regrets in not asking for clarification. Talking to a financial advisor about my 401(k) choices could have put me on track to understanding investments much sooner, but a feeling that I should have known kept me from seeking help. My stock journey was somewhat similar, yet different. My story may help you in your own journey to stock ownership, so let’s take a look at my life in the market.

Fear of the Market

Because I did not understand 401(k) investments until my mid-twenties, I did not even attempt to understand the stock market for years. The market scared me. How did I begin? What happened if the market crashed again (this was right after the dot com crash)? Isn’t my 401(k) enough? These questions floated through my mind and discouraged me from investing, and it was my grandmother who started to encourage my interest in the stock market, citing inflation rates, the likelihood of social security dying before I got old enough to cash in and the necessity of at least a million dollars in savings to pull me through a comfortable (not extravagant) retirement. Together, my husband and I would need at least two million dollars to retire at age 67 1/2.

The two million dollar retirement figure scared me enough to take action. I was not ready to dive right into the market, though. Personally, I needed to figure out the logistics of the market, to understand what I was doing before I traded. My most trusted source of information has always been books, so I bought a great, easy-to-read investment book, “Understanding Stocks” by Michael Sincere. With an excellent format and simple, to-the-point explanations, the book offered me a chance to delve into the ideas of the stock market without getting my feet wet.

Understanding the Market is Not an Investment Shoo-in

Now that I understood the stock market, you would think I would jump right in, right? Not the case. My two cross-country moves in three years killed most of my emergency savings account, and I needed to rebuild that first. Also, the second stock market crash in 2008 dampened my excitement a bit. I decided to wait for a market rebound to invest in my first stocks outside my 401(k). It was not that I did not believe in the stock market: I know I stood to make some money in stock investments, but if I could wait to begin my stock journey until the market was more promising, I could possibly save myself from losing money. Also, I wanted to take the time to figure out which companies were worthy of my investment.

Taking the Plunge

I am now ready to invest, and I am really excited about the possibilities. The first investment I will make (very soon) is in a company that pays dividends. Right now, I am weighing my options, and I will decide between Mattel and General Mills. Both are companies that I believe will last through the long haul, since I do not see people ever eliminating toys and cereals from their family budgets. Sure, both companies may encounter troubles during crashes and periods of high unemployment, but I feel both will bounce back rather easily. These investments are ones in which I feel safe purchasing and holding stocks for a long period of time, through the highs and lows of the stock market.

My journey to stock ownership is just beginning, but I now feel prepared to jump into the deep end after dipping my feet into understanding the stock market. I hope my story of (very late!) personal investments can help you decide now is the time to invest in the market. The news about rebounds is hopeful, and buying stocks soon could be a very profitable move for you and your family.

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Anonymous's picture

Fear of Stocks | MomVesting — Debt Free Forever! wrote:

Sat, 03/12/2011 - 15:13 Comment #: 1

[...] GE Miller posted about this interesting story. Here is a small section of the postAlso, the second stock market crash in 2008 dampened my excitement a bit. I decided to wait for a market rebound to invest in my first stocks outside my 401(k). It was not that I did not believe in the stock market: I know I stood to … [...]

Anonymous's picture

optionsdude wrote:

Mon, 04/04/2011 - 09:56 Comment #: 2

I have found that fear for me results from 2 primary reasons: fear of the unknown and lack of control. When investing in stocks, I have eliminated this fear by using protective puts. I know that I cannot lose more than a certain amount even if the company goes bankrupt and the stock becomes worthless. I also have control over that amount and can designate a time frame for this protection. Using protective puts eliminates all fear that I have when it comes to investing in individual stocks.

Christa Palm's picture

Christa Palm wrote:

Mon, 04/04/2011 - 18:38 Comment #: 3

Optionsdude, I checked out your site, and you have a lot of great information out there! Protective puts definitely sound like they'd be up my alley -- thanks for the input!

Anonymous's picture

optionsdude wrote:

Mon, 04/04/2011 - 19:17 Comment #: 4

You are welcome. Feel free to ask me any question about options that you may have. I will be glad to answer. Also, I will be increasing the amount of material on my site as well over time. It is just impossible to write 100 or so articles all at one time.

Christa Palm's picture

Christa Palm wrote:

Mon, 04/04/2011 - 21:15 Comment #: 5

Excellent -- I will definitely check back with you and with the site :-)

Anonymous's picture

Everything You Need to Know about Stocks | MomVesting wrote:

Thu, 01/19/2012 - 21:47 Comment #: 6

[...] about investing? You're not alone. Find out how Christa overcame her fear of stocks and how you can do the [...]