Getting over your fear of investing in stock market

by Karen

I had coffee with a good friend recently and she was very upset because her husband lost $20,000 in stock market. She should be pissed. Her dream Europe trip and few more luxury buys that she has been dreaming about just went out of the window. Curiously, I asked her what stock he brought (note to self: don’t buy those stocks!) “Oh, I don’t know. He told me: we lost $20,000 in stock value”, she said. It turned out her husband has been the sole manager/investor for their retirement and savings. My friend didn’t even know what the annual rate of return on their portfolio was. My friend is an intelligent woman who also has worked in insurance/financial service industry or many years, yet she didn’t know anything about her financial planning. How it is possible that a highly educated and savvy woman didn’t manage her own finance?

New language…

So, I started asking around and it turned out that majority of my female friends didn’t manage their investment portfolio. They delegated this task to their husbands, wealth advisors or private bankers. I have been managing my retirement portfolio for over 15 years but I must admit that I wasn’t always comfortable when I started investing. There were couple of things that made me really uneasy when I started to invest in stocks:

  • Sex appeal. I may sound sexist, but those ugly looking line charts that commonly used to show stock performance would be more appealing to a man than a woman. Second, investment industry marketing materials typically cater to male customer which really ticked me off
  • Like any other profession, the investment experts have their own “I am so sophisticate and know it all language”. They would say thing like: A weak recovery in Asian market reduces price to earnings ratios on a number of large stocks cap in the emerging market” What the heck was that all about? When I read this sentence, my brain translated it to: blah…blah and blah. Well, it turned out the expert wanted to say “The Asian market has weak trading activities and that in turn is impacting the stock price of a number of companies with a market capitalization value of more than $10 billion in the emerging market. Now, when the price of these companies’ stocks drop and their earning per share remain constant, these companies will look less attractive to investors because investors typically use price to earnings ratios to measure the attractiveness of a company. Price to earnings ratios is measure based on share price divides by earning per share.” I don’t know about you, but I would find this easier to understand because this explanation provides more context and in easier to understand language. Don’t feel bad. You are not alone.

A lot of smart people are put off by this investment language which is why the wealth management field (aka: wealth advisor, investment advisor or investment fund specialist etc.…) is a fast-growing profession. People get intimidated by the investment language and decide to hire a wealth advisor instead of investing on their own

  • Lose your shirt. The stock market can behave in an illogical manner due to speculators stocking fears and uncertainty. Thus there is always a fear that you can lose all your money for no good reason

All this is too say that your uneasiness with stock market is well justified. The investment industry hasn’t made it easy for women investors by presenting investing as really complicated and near impossible to comprehend subject. Again, it could be my sexist mind set talking, but I think it serve two purposes:

  • Raises the level of entry so women don’t invest just in case we can beat them in this game. And yes, there is research indicating that women are better investor than men. So, take that!
  • Maintain the myth that investing is scientific and that investment analysis is reliable. Yeah right!

Like many of you, I was very leery of stock market but I also knew that I won’t be able to build my $2.5 million-dollar retirement portfolio (yes, I plan to travel till I end up in a wheel chair so I will definitely need the cash) if I only invested in GIC, savings and mutual funds. Don’t get me started on the mutual fund because mutual fund is just a pool of stocks that manage a fund manager manage and they charge you hefty fee for their service. I may write just another post on mutual fund. But I digress. If you have read a couple of my posts, you know that I am somewhat of a control freak and I have a deep root fear of financial stability. I need to have my financial independency, and I don’t trust someone else to invest my hard-earned dollars. I want to invest and have full control of my finance.

Getting into it..

The first step in investing was not easy but it was never easy when you had to learn something new and had to deal with the ambiguity.  To get over my uneasiness of investing and managed the ambiguity of the stock market, I did one thing that gave me the confident: I researched and learned.

Knowledge is power because if you know about the issue then you will no longer be afraid. I can see it in your eyes already. Learn the stock market trade, if it is that easy everyone would just do it and get rich? I will concede that it was not that easy to learn and understand how to trade and invest profitably in stock market. And I am not an expert in stock trading, but I learn enough to make me confident and comfortable in my purchase decision and make a decent return on my portfolio. There are couple of things I like to share with you that may help you to be more comfortable and confident in investing in stocks

  • Learn to read the investment language. It was a difficult thing to learn and digest the market information. But I will say this: Bless Google! The search engine enabled me to search and learn the investment language quite easily. It was a lot of time investment at the beginning, but knowledge is the power that will build your confident and help you to get over your fear. Happy searching and learning, ladies!

Here are couple of sites that I used initially to get my feet wet: http://www.businessinsider.com, https://www.moneycrashers.com, https://www.investopedia.com/. I like Investopedia the most because the site provides example along with the definition, which made it easier for me to fully understand the meaning of the terminology. As I get more and more comfortable with stock charts and lingo, I use these 2 sites: https://finviz.comhttp://stockcharts.com. Don’t jump into these 2 sites if you are a beginner at investing because there are a lot of information on these two sites and their presentations are catered to stock traders or someone who have quite a bit of trading experience under their belt. If you don’t have much knowledge of trading tools yet, these 2 sites can be overwhelming and a turn off.

  • Invest in the company and industry that you know well. I invested heavily into financial service and technology sector because these were the industries that I worked in. Because I knew these industries, it built my confident and got me to be comfortable enough to make my first few stocks purchases. As my confident grew overtime, I researched other industries and purchase stocks outside of banking and technology sector. Today my portfolio is consisted of banks, insurance, technology, pharmaceutical, energy and aviation companies.
  • Hold your stocks and watch them grow. The stock markets fluctuate, but I always look for value stocks, buy them and then hold them. I am an investor not a speculator. I tend to look for stocks that trade at price below where they should be based on the company’s financial status and trading indicators. For example, the stock price may also have dropped due to public perception regarding factors that have little to do with the company’s current operations. I am not alone in the belief of value stock investing. Warrant Buffet makes no secret that he follows the principle of investing that Benjamin Graham wrote in a book called The Intelligent Investor. In a nutshell, Graham advocated for you to be an investor instead of a speculator. Buy value stocks and hold them! Don’t just buy and just sell on panic or speculation. This book is dry as a desert of a read but it has a lot of great investing advices. So, if you can bear with it, I recommend you give it a try. It will worth your time investment. Just make sure you have strong coffee or matcha nearby. Get a cupcake too if you have one. I went thru a lot of coffee and cakes with this book. A dry and yawn worthy read likes The Intelligent Investor would hammer my snooze button fast, so I purposely got myself a good coffee, good lighting, some light music in the back ground to relax then I sunk into the book. It is a little trick I do to deal with text book reading. It works for me.
  • Don’t wait. I jumped into the stock market as soon as I saved up some money. With 40 years of working life ahead of me, I figured that I would have time to rebuild my portfolio if I made a bad call and lost some money

Wealth advisors and other investment professionals have their uses, but you should be the boss of your portfolio and should know without any doubt what your portfolio rate of return is. And the power to be financially independent and in control of your assets will give you tremendous confident and satisfaction. At least, it is for me. I believe the fact that I am financially independent is a strong contributor to the longevity and success of my relationship with my husband. We are both financially independents and share mutual respect for each other ability and that makes us work harder to make the relationship last.

Lastly, I firmly believe that any woman can be a successful investor. There have been many researches indicating that, women were born to be a successful investor. So ladies, build your confident and find the investment that you will be comfortable with and jump in.

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