The Four Mental Hurdles Every New Investor Needs to Overcome

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Let’s face it: if investing was as simple as it seemed on the surface, just about everyone would be raking in big bucks, right?

However, we all know that finding success via the stock market is much easier said than done. Although becoming an overnight success story certainly isn’t something that newbies should expect, there’s no need to step into the world of investing with a sense of gloom and doom. While it pays to be hopeful, it likewise pays to have realistic expectations.

Finding success as a new investor often requires overcoming some distinct mental hurdles. Whether you’re new to the game or are struggling to see the ROI given your blood, sweat and tears, consider the following checklist as a way to provide yourself with some peace of mind.

Breaking Down the Language Barrier

Risk. Options. Volatility.

The initial days of investing can feel like learning a foreign language, right? Although you might not know what a covered call stock screener is today, the fact remains that you’re expected to master the terminology of investing sooner rather than later.

Perhaps the best way to make it happen is to soak up as much investment knowledge as you possibly can via mentors and the investment blogosphere. Strive to understand a few new terms per day as you get your feet wet: the more you immerse yourself in the world of investing, the easier it is to understand essential terms over time.

The Concept of Risk

Of the various concepts that new investors learn, risk is arguably the most important to understand. While “high risk, high reward” investments may sound enticing, they’re dangerous for newbies who have no idea what they’re doing. There’s a reason why so much time, research and money goes into the act of risk assessment as investors strive for the best ROI possible.

Remember: investing should not be akin to gambling. Newbies should start with the safest stocks possible to ease them into understanding just how difficult the market can be to manage.

Smart Companies Aren’t Always Smart Investments

On a similar note, it may be tempting to throw your money at the latest start-up or app in pursuit of some quick cash; however, the correlation isn’t always there. This is especially true in the case of companies whose stock has risen to such astronomical levels that it’s seemingly impossible to get a decent return. When in doubt, be wary of the hype and instead focus on safe investments.

The Art of Losing

It’s important to accept in the early goings of your investing career that you’ll probably lose a bit of money before you make any decent returns. Making peace with this now will provide you with realistic expectations down the road.

Again, this isn’t about accepting your fate before getting started. There’s a reason why you should start investing with disposable income versus putting your savings account on the line. Similarly, every misstep you take as investor represents a valuable lesson regarding how you should approach future investments.

Don’t let yourself get in over your head if you’re a newbie. Take these mental hurdles head on and think of them as baby steps on your journey toward becoming a better investor.

12 thoughts on “The Four Mental Hurdles Every New Investor Needs to Overcome”

    • Hi MH,

      I totally agree with you. For a newbie to investing, starting small can be great advice, and these days with low cost or free commission trading, investing a small amount of cash is plausible. Thank you for stopping by and commenting.

  1. I generally agree with this post. Investing can seem intimidating at first, because there are so many options and strategies and paths an investor can take. A beginning investor would be wise to slow down and keep it simple and take their time to educate themselves. One should probably not invest in something they don’t understand. Yet, try not to over analyze either. At some point, you just have to take action.

    Good post.
    Dividend Portfolio recently posted…How To Invest $20,000?My Profile

    • Hi DP,

      I think there is a learning curve for every new investor. We all bought duds at some point, chased crazy high yield stocks and invested in companies that we really did not understand or are even pump and dump penny stocks. It takes time to learn and develop your personal taste for risk and what your main objective for investing is. Some invest for rapid growth while others simply invest for income generation. As you stated, whatever the case may be at some point you just have to take that leap and start, which is often the hardest step to take. As always, I appreciate your comment.

    • Hi DD,

      That’s my mantra. Slow and steady, consistency and patience. I have been a dividend growth investor for almost ten years, very slowly building up my passive income stream as you can see every month. I know I have the patience to stick with the well known names in the dividend space and not chase any high yield fantasies. Sure, even the solid names can falter from time to time but that’s why we diversify and remain calm during turbulent times. Thank you for sharing your thoughts.

    • Hi Jay,

      No doubt psychology affects every trader/investor to some extent. You know the saying, “Once bitten twice shy.” These are the mental hurdles that we must always keep in check to be successful long term investors. Thank you for stopping by and commenting.

  2. For me the easiest way I learnt to breakdown the language barrier was by actually investing my money. I started investing with very little and gradually built my knowledge in the process. Had I focused on learning the language or terminology of investing in the first instance, I would probably never have invested a penny. I totally agree, the art of losing some money is inevitable. The best way I learn to overcome this hurdle too was to see the losses as an investment in my financial education rather than complete loss – there is always a valuable lesson to learn.

    • Hi Esthy,

      Sometimes the best way to jump over any barrier is to simple ‘dive in.’ As you stated, by investing real money you have forced yourself to learn the language and subtleties of investing quickly. Thank you for sharing your personal experience.

  3. DH,
    For me, just getting the courage to get in to the market initially is a huge hurdle. It is very intimidating. Once you do, you realize it isn’t that difficult. Now, I can’t imaging not being invested. Good post with some good points. Thanks for sharing.
    Brian recently posted…Portfolio Spotlight Series – CINFMy Profile

    • Hi Brian,

      Often, taking that first step into anything new is a huge hurdle. When it comes to stock market investing these days there really shouldn’t be any hurdles as the cost to start is minimal. With low and no fee brokers that exist these days along with minimal buys as low as one share the fear of losing money is greatly mitigated which should encourage anyone to give it a shot. Thank you for commenting.


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