Some people think investing is like the man in the picture solving a formula that very few understand. There are a lot of common reasons that people don’t invest into stocks (or many other asset classes). Some understandable, others circumstantial but all mostly behavioural. Before we get into investing, understanding why others avoid the markets can be helpful. All though we may be advocates for investing in public markets we can not have the confirmation bias that it is for everyone. What is suitable for one person may not be for another.

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It all seems to hard to invest!

A lot of people over complicate the entire investing process. While there are certain levels of investing that requires an understanding about modelling, valuations and finding the intrinsic value of a company this should not deter you from getting involved. It can be hard; I am not saying it is easy but like everything in life taking small bite sized chunks and approaching investing with a “lifelong learning” mentality will help.

Many people who are interested in investing and wealth creation are able to learn how to invest, you don’t need degrees, a financial background or be an advanced algebra expert. Investing to me is mostly behavioural and the part that is skipped the most.

People believe in the Government.

The Government may fund your retirement via pension or Superannuation schemes. Some don’t bother to plan because they think the Government will sort them out and it will be sufficient to last them for the rest of their days. It may be enough for some and no where near enough for others. With a little discipline and an earlier start allocating a portion of your income to investing can help look after your future self and should be done if it’s within your capacity to do so.

Some people don’t care to Invest.

I have met many who didn’t care at all. They had no interest accumulating money or planning for their future selves. This mindset can come from a number of things like having a poor relationship with money or view of what wealth is, it can be generational from a period or environment when they were born, it can be circumstantial around that persons way of life.

It is ok to have this view. I have had snide remarks about my own focus on money, “why do you need so much”, “money is the root of all evil”, “I don’t need money to be happy”. All the comments are their perspective and I accept it. If you don’t care about money, wealth creation and your future self you are free to do so.

No spare change to Invest.

This comes down to a budgeting habit in most cases. The world is doing it hard, times are tough, rising rates, inflation, cost of living and home ownership is only going up. However, it is not a reason to avoid investing and in fact should be the reason to start.

In a different period it may have been harder to invest with less but not now. There are products that suit most needs, like fractional ownership, online brokers, low fees, anyone can get started in the market with a few dollars. Start small, cultivate the habit, budget, and make the space for Investing. It is all a choice.

Lack of Knowledge on how to Invest.

This area is the most common, there are many who do want to invest, develop wealth, and plan for their futures but don’t know where to start. With the abundance of information, products, media, and options it can be overwhelming. There are hundreds of thousands of places to park your hard-earned money.

Self-education is not too common either, people want to be told where to put their money and the easiest way to make it. If you are serious about your financial future, there is ample information out there to help you get started. You need to take ownership and put some work in to understand it.

Don’t believe they can Invest.

People don’t believe they can beat the markets or do well. For those who don’t believe in themselves and lack the knowledge perhaps go see a financial adviser. Whilst I don’t recommend this path as you can learn what you need to learn to get started, being in the market by paying for advice is better than sitting on the sidelines earning nothing.

You must believe in your ability to put the work in, bridge the knowledge gaps and ask the questions. I’m not suggesting jump into being an active stock picker but starting with Index funds or ETF’s is within most people’s competence to understand.

Don’t trust in the market.

Distrust for markets in my experiences is most common among certain demographics, where as simple as when you were born can determine your view on public markets. If you were born in a recession, bear market, or had your money wiped out in pensions it is fair that your distain for markets will carry on. If you were born in an era that started in bull markets and you made money your view is going to be different. Our trust is often shaped by our experiences.

Fraud is prevalent, insider trading happens, there are mishaps all the time in public markets, people are generally quite sceptical about putting hard-earned dollars into a machine that is often not leaning in their favour.  

FEAR about the markets.

The doom and gloom outlook is fantastic for “click bait”. Not all noise is bad, but the vast majority is of no use to your investing journey. Fear of crashes, recessions, negative news draws eyes. The more visits the more money the financial media machines make. As a beginner or someone considering investing it is hard to make independent decisions when the herd around you is fearful.

All this negativity and noise pushes people away from active investing. People are drilled with the idea that they can not beat the market, often by those with the incentive that makes you depend on them. Fear sells.

Can’t fathom long term returns.

While we understand the effects on compounding and know it is something magical, we often don’t have the patience or discipline to see compounding play out. When told invest $X for 20 years all dividends reinvested, and you will have this amount at the end, it seems wonderful but too challenging to wait decade after decade for the result to materialise. We don’t want to buy and hold; we want instant returns. I believe people struggle with the intangible part of investing, waiting, watching, and sticking to the plan long enough to see it work.

YOLO (You only live once)

There is a growing community of YOLO minded people. The term first came to my attention well before Covid and I saw it mostly in crypto enthusiasts. I understand the mindset behind it and to a degree I like the idea of live in the moment and take the chance as YOLO! However, I have had a lot of hits in my 15 years in business, start-ups, investing and I’d rather be where I am now having planned, invested, and delayed gratification to be here.

We forget that we will get old, tired, our energy depletes, life happens, we cannot predict the future. Whilst we should live in the moment, we can not also deny some forward thinking about the future because at some stage we will be there.

Don’t have the time.

People may lack the time; some are generally busy, and others just don’t want to allocate the time to it. Successful investing does involve a decent amount of time. As an active stock picker, you need time, to research, do due diligence, hunt for opportunity, it is not a 20min after work event in my opinion. However, not investing due to time is a poor excuse. Setting up an automated passive investing strategy like Index funds and dollar costing on automation requires very little effort after the initial set up. I am not suggesting this as the solution just as a point that we all can make time for our wealth creation journey.

In summary…

These are the most common reasons why I see people staying away from Investing even though some know they should invest. If you fit into any of these descriptions take some time to reflect and see what can be addressed. The world of investing has many solutions, and you will find and can tailor something that suits your needs and circumstances.

If you don’t invest what is the reason?