9 Silly Reasons People Don't Invest (But Should)


Over the years, I've come across a lot of people who have never invested. For many people, it's due to lack of knowledge or a feeling of intimidation, and those are usually things they learn to overcome. But I've also heard some rather silly reasons for choosing not to get started, and many of them have made me cringe. (See also: 6 Common Excuses for Not Saving Money)

Here are some actual reasons people have cited for choosing not to invest their money.

1. "I Have Very Little Money to Invest"

If you are truly living below the poverty line or have large quantities of debt, investing may not be for you right now. But it's easy to get started investing even with just a few bucks. Most discount brokerages will let you trade for less than $10, and you can purchase even just a single share of a mutual fund or company. In most cases, there are no account minimums.

If you have a 401(k) plan from your employer, consider contributing just 1% of your gross income. Over time, look to increase that to take advantage of your full company match, if one is offered.

It's also important to take a hard look at your finances and spending. You may think you have no cash to invest, but chances are you can find some just by making a few lifestyle changes.

2. "I Don't Want to Lose Money"

This is not to suggest that no one has ever lost money in the stock market. Of course, it's possible to lose a lot of money in a short amount of time. But over the long term you will almost always recoup any losses and go on experience significant gains. The average return of the S&P 500 since the early 20th Century is more than 9%. If you are patient, you'll be fine.

3. "I Don't Plan to Stay With This Company for Very Long"

I had a co-worker at an old job who refused to sign up for the company's 401(k) plan because he didn't feel like he'd be working at the company for a long time. This is extremely flawed thinking, because it fails to acknowledge the major advantage of 401(k) plans, which is that you get to take your money with you even if you leave. These plans are unlike pension plans, which do require you to stay with the company a certain number of years.

By failing to contribute to a company retirement plan, you may be giving up a company match, which is free money.

Now, it's important to note that many companies have vesting requirements, which means you may have to give the company's contributions back if you leave prior to a certain amount of time. But even then, employers are required to be 100% vested within six years.

4. "I'm Self-Employed and Don't Have Access to a Company Retirement Plan"

If you work for yourself, or if your employer doesn't offer a retirement plan, there are other ways to invest and still get tax breaks and other benefits through an Individual Retirement Account (IRA.) A Roth IRA allows anyone with earned income to contribute up to $5,500 per year, and the money can be withdrawn tax free when they retire. A traditional IRA works in reverse; you pay taxes when you withdraw the money, but the contributions are deducted from your taxable income. In addition, there are other, tax-advantaged retirement options for the self-employed (SEPs and SIMPLEs), which, while more complicated than vanilla IRAs, can be set up by a financial planner pretty easily.

Even after you contribute the maximum into these accounts, it's easy to open a brokerage account and invest in almost anything you want. Start by putting money into a low-cost Index Fund or the stock of a big company you are familiar with. Eventually you'll realize that even if you don't have a pension or 401(k), you can set yourself up for a great retirement or boost your overall income.

5. "I'd Rather Use the Money to Buy… Stuff"

If you have some extra money, you're almost always best off investing it rather than spending it on stuff. Investments usually increase in value. Physical items you buy rarely do. Of course, I am not suggesting people should deprive themselves of all material possessions. (And yes, there are some things like real estate that can increase in value and can be viewed as investments.)

But in general, when on the fence between investing and purchasing something, you'll be better off in the long run if you invest. In fact, some of the most successful investors are people who earned relatively modest incomes but also lived below their means and were therefore able to invest.

6. "I'm Young. I'll Worry About It Later"

Every day you postpone investing will cost you money. The earlier you start, the better off you'll be, due to the value of compounding returns. Consider a person who is age 40 and begins investing with $10,000, adding $100 per month. Assuming an annual return of 9%, they will have about $163,000 at age 63. A person who makes the same investments but starts at age 30 will end up with $406,000. That's almost triple the money just from starting 10 years earlier.

7. "I Earn a Ton of Money Now. No Need to Think About It"

How stable is your job? How comfortable are you that you can support your lifestyle if your income takes a nose dive?

If you currently have a high income, investing aggressively can help keep your family secure even if things go bad. Stocks and other investments that aren't in retirement accounts can be sold in the event of a financial emergency. Look for dividend-yielding stocks that can offer additional income that won't go away if you're laid off. The point is: Never assume you've got it made.

8. "My Folks Are Rich. I Don't Need to Worry About It"

If you have relatives that are well-off and you're expecting an inheritance, then you are fortunate. But there are few guarantees in life. Stories abound of people who believed their parents were wealthy, only to find out they were actually neck-deep in debt. And we've all heard stories of children unexpectedly cut out of the parents' will for one reason or another. Furthermore, estate taxes and legal fees can eat up more of an inheritance than many people bargain for, and you'd be surprised how quickly the circumstances of life can deplete a nest egg. Take control of your own finances by investing as if no one has promised you anything.

9. "I'd Rather Give My Money Away"

Guess what? Even if you are that awesome type of person who would rather give away every penny they own than become rich, investing is for you. Charities absolutely love getting stocks and other investments as donations, because they often will increase in value, further helping them carry out their missions. In short, your giving power is usually higher when you donate investments instead of simply cash. (Your donation is usually tax deductible, too.) Many discount brokerage firms such as Fidelity will help you set up a special account for giving.

Have you ever heard a silly reason for not investing? Share it with us below!

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Guest's picture

Nice article Tim! I think #3 and #6 bother me the most when I hear them. There is actually beauty in getting a 401k at an employer and then leaving the company. Because then you can roll it into an IRA and manage the money however you want (not limited to the funds available in the 401k).

Guest's picture

Having very little money to invest is not really an excuse as you quite rightly point out. The fact is unless you invest as early as possible it will only make life more difficult as you reach retirement age

There are numerous examples of people who have failed to invest the most opportune time only to find that they are in increasing poverty in the future.

I do also think that it can be such a complex area that for some of the perceived difficulties in investing put them off. However at that point it is crucial to get professional help and advice.

Guest's picture

I would just like to comment on #8. If your parents do have money, they may outlive you or you will already be in retirement limping along before the money comes to you.

Guest's picture

Hi Tim

there is a 10th reason for not investing

Low Returns- When people start tracking their investments on daily basis, the returns are very low.

Investments should always be done for a longer duration, then the returns can be awesome.

Guest's picture

Great points, in a way Ajay is right but it is all about investing smart. Having your money work for you is the key. I think that investing in Real Estate is a solid place to be. Investing smart can have huge returns in the long term. Many people tend to invest to get rich quick. Investing in my view is a slow and smart process. Great read thanks.

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