Close your eyes for a moment and imagine an investor.
Did you picture someone older, wealthy, with a good job and lots of cash? Were they an influencer, or work on Wall Street?
Or did you picture someone who looked like you?
The reality is that anyone can be an investor, and the hurdles to buying stocks or planning for retirement are largely self-imposed. Here are six reasons you might not be investing (and why you shouldn’t let them stop you).
1. Not enough money
A common misconception is that you need to earn a lot to start investing.1 That’s simply not true. Bigger investments may yield bigger returns, but starting small is fine—and the earlier, the better.
“It establishes two things,” says Yanette Sullivan, financial advisor for Truist, about starting early and small. “Consistency and the concept of paying yourself first.”
And you don’t have to live a spartan lifestyle riddled with guilt over your indulgences to achieve it. Sullivan suggests that investing $100 a month can have a big impact on your future financial goals. That could simply be one less dinner out a week or staying in one weekend night a month in exchange for a monthly contribution that will help get you to your future goals.
Small contributions can go a long way. If you started with a principal investment of $5,000 and contributed $100 a month for a year into an account that returns an annual percentage of 5%, you’d have contributed $1,200 to the principal investment plus $277.26 in earnings. Your account balance would be $6,477.26 after one year. In the following year with the same contributions, you’d have an approximate balance of $8,028.38. The longer you contribute to the account, the more your money can accumulate.
And as your income hopefully increases with time, look for ways to keep your lifestyle within a reasonable budget so you can invest even more.
2. Fear of economic downturns
Multiple recessions, a pandemic, and geopolitical conflicts have conditioned us to sometimes fear the worst. Market volatility is real and a strong deterrent for young or inexperienced investors. But if you’re investing consistently and your goals are long-term, market fluctuation shouldn’t derail your financial future.
It’s natural to panic when you own stocks during an economic downturn, but don’t let your emotions get the better of you. Making hasty investment decisions can be far more detrimental than enduring a temporary market decline. The length of time you have your money invested is more important than waiting for the “right” time to invest.
3. Student loan debt
Over 14 million millennials struggle with higher education loans, holding almost a third of the nation’s total student loan debt.1 More millennials have student loan debt than any other generation—but there’s no financial rule that says you shouldn’t invest while repaying your loans.
“Even if you have debt today, long-term, compounded growth can still meet your future goals, whether it’s retirement, a house, or college,” says Sullivan.
4. Lack of financial know-how
You don’t have to be a pro to make investing work for you—start simple and build on your knowledge. In fact, there are easy ways people invest without feeling like they’re investing.
“If a person is fortunate enough to work for an employer that offers a 401(k), I would contribute immediately,” says Frank Delia, a Truist financial advisor. “You’d be surprised how quickly that money starts adding up.”
A 401(k) is a retirement account that provides significant tax advantages. By setting up automatic contributions, the money gets transferred straight from your paycheck before you get a chance to spend it elsewhere—this is called “paying yourself first.” And if your employer offers contribution matching, that’s essentially free money toward your future. Every little bit helps.
Another solution? A type of individual retirement account (IRA) known as a Roth IRA.
“The Roth IRA is a huge benefit that previous generations didn’t have, and it allows young investors to start a tax-free retirement nest egg for the future,” says Delia.
Contributions to a Roth IRA are not tax-deductible, but qualified withdrawals will be tax-free. Most brokerage firms, banks, and investment companies offer Roth IRAs—and you can set one up online or in person.
5. Being too busy
You’re willing to invest, you have the funds, and you’ve got goals in mind—but you feel like you can’t find the time to act on your plans. The good news is you don’t have to schedule time with a financial advisor or a brokerage firm to start investing.
For example, more and more young investors are embracing the convenience of robo-advisors, such as Truist Invest: automated investing services that do the heavy lifting when it comes to building and maintaining a portfolio. With a robo-advisor, you can set up an account in minutes, establish recurring deposits from a bank account, and watch as the technology automatically invests your money in a portfolio aligned with your goals.
Truist Invest, along with most robo-advisors, will invest your money in low-cost exchange-traded funds (ETFs) or mutual funds that are managed by professionals.
6. Feeling too late to the game
Your biggest ally is time—but it’s never too late to start investing. Even if you feel like you’re playing catch-up, you’ll be amazed by how your money can grow in 10 or even 5 years. And you can always adjust your strategy as you grow and your goals change.
“As long as your goals aren’t short-term, it’s never too late to invest,” says Sullivan.
With longer investing time horizons (think years—not months), there’s plenty of opportunity to grow your money.
“Even if you start conservatively, it’s amazing how you can build shares or build value in an investment account in just a few years,” adds Delia.
The most important step is getting started.