Some people, whether your friends or family, might seem naturally confident when talking about investing.
They may understand complex jargon, regularly follow market news, and feel comfortable making long-term decisions involving their wealth.
If you don’t feel the same way, it’s easy to assume that investing simply “isn’t for you”. Yet, this is often just a misconception.
Research from Aviva found that 61% of UK adults believe some people are just “born investors” and are naturally more comfortable with investing than others.
Investing isn’t an innate ability that only some people have, but rather a skill you can develop over time.
It’s important to remember that the value of investments can fall as well as rise, so you must understand the risks involved.
Still, building your knowledge gradually and creating a plan that suits your goals could help investing feel more manageable than you first imagined.
Continue reading to learn why being a “natural-born investor” is largely a financial myth, and how you can build long-term confidence.
Investing confidence often develops through experience
It is entirely understandable that you might find investing daunting at first. After all, it typically involves choosing funds, determining how much risk you’re comfortable taking on, and dealing with market swings.
The aforementioned study from Aviva suggests that just 44% of UK adults described themselves as confident investors, while 31% said they aren’t confident.
A lack of exposure to investing could be a major contributor to this, as only 21% of respondents were encouraged by their families to think about investing from an early age.
Meanwhile, 32% said they came to investing later in life through their own interest and curiosity.
Typically, the more you understand what investing is for, how markets behave, and strategies for dealing with risk, the less intimidating it may become.
This doesn’t mean you need to start by knowing everything. In fact, many investors tend to build their confidence gradually.
According to Aviva, 42% of investors would change how they managed their investments if they could go back in time, while 23% admit they have made investment decisions they regret.
This doesn’t mean they have failed, but rather that investing often involves learning over time.
Experience can help you understand how you would respond to market volatility, what levels of risk feel appropriate, and the habits that could help you make better long-term decisions.
Discipline may matter more than instinct
The idea of a “natural-born investor” can create the impression that successful investing depends on instinct.
In reality, long-term investing is often more about discipline than “gut” decisions. This might include:
- Investing for clear goals
- Holding a diversified portfolio
- Staying invested during periods of volatility
- Avoiding emotion-led decisions
- Giving your investments enough time to grow.
It’s worth remembering that investing is about allowing your wealth to grow over the long term, rather than attempting to predict the next market movement.
This is especially vital if you’re investing for retirement or other long-term goals.
Markets will rise and fall naturally over time, as headlines, political events, and investor sentiment can all affect performance in the short term.
If you react to every movement, you may end up making rushed decisions that harm your progress towards your long-term goals.
Discipline could help you avoid these pitfalls. For instance, investing regular amounts could help you build a habit and reduce the pressure of choosing the “perfect” time to invest.
Meanwhile, diversification could reduce reliance on any one company, sector, or asset class.
Remember: neither approach entirely removes risk. Yet, they can help you manage uncertainty more effectively.
Investing does not have to mean taking unnecessary risks
Another reason you may hesitate to invest is the belief that investing is too risky. Aviva found that 24% of respondents felt this way, while 21% said they don’t fully understand it.
Investing does involve risk, and it’s important you don’t ignore this. Your investments can fall in value, and you may not get back the full amount you invested.
However, there are different levels of investment risk, and you can build your portfolio around your personal risk profile, time frame, and long-term goals.
For example, if you’re close to retirement and expect to draw from your portfolio soon, you may need a different strategy from someone in their 30s investing for several decades.
Equally, if market downturns make you anxious, it might be prudent to ensure your portfolio reflects this.
It’s also worth noting that taking too little risk can lead to problems.
If you hold too much in cash for long-term goals, inflation may gradually reduce the purchasing power of your money.
This could make it more challenging to maintain your ideal lifestyle in retirement or achieve other important objectives.
Professional guidance could help you move from uncertainty to confidence
Encouragingly, Aviva’s survey found that 66% of UK adults are interested in changing their attitudes towards investing and building confidence.
A financial planner could be the ideal way to bridge this gap.
We could explain investing principles in clear language and help you understand how various decisions might affect your wider plans.
This might include discussing:
- Why you want to invest
- How long you can leave money invested
- How much risk you feel comfortable taking
- Whether your current portfolio is adequately diversified.
We could also help you block out short-term noise during periods of downturn, preventing you from making emotion-led decisions, selling your investments, and crystallising losses.
To find out more, please contact us by email at info@investmentsense.co.uk or call 0115 933 8433.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
