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What to Invest in When You are Scared to Invest

There are times when the stock market causes real fear for investors. It’s scary to see the markets and your portfolio value go down day after day. This is especially true for those closer to retirement. At times like that, it’s hard to know what to invest in or whether one should be investing at all.

what to invest in

You can’t discount the power of fear. Even the most seasoned investors get it from time to time. However, those who have been investing for a long time know something that perhaps a beginning investor doesn’t know – fear is not necessarily an excuse to stop investing.

But fear could be something that prompts you to reevaluate what to invest in. Market downturns are a great time to look again at your portfolio and analyze your strategy. Every time I’ve done that, it has actually served to calm me down. It reminds me that I am following sound investing practices that will serve me well in the long run.

There is good news if you are scared of the markets and don’t know what to invest in. There are a couple simple strategies to follow that can help you sleep easier at night. Here are several to consider that will help you put your fears to rest.

What to Invest in When Your Scared

If you are looking at what to invest in when you are scared, sometimes it’s easier to eliminate some options. If you are scared of losing your money, then you should never be investing in things like cryptocurrencies (i.e. bitcoin), options, commodities (i.e. gold, silver) or penny stocks. And you should never be day trading stocks. All of these are risky investing choices. Extreme risk is the last thing you need if you are scared.

Additionally, I’d even caution against investing in any one individual stock. One company can run into hard times at any given quarter. If they issue a profit warning, you could be looking at losing a substantial chunk of your investing dollars overnight.

However, there are three really good investments to make if you are scared and don’t know what to invest in. They are:

A CD (Certificate of Deposit)

CDs are a basic savings instrument you usually find at a local or online bank. They are similar to savings accounts, but they offer a higher interest rate. They can do this because when you buy one, you lock your money up for a set amount of time.

Typical CDs are ones that last for 3, 6 or 12 months. The longer the time frame is, the higher the interest rate. So the higher interest rate may entice you. But keep in mind, you are locking your money up for that length of time. You can’t withdraw it without penalty.

CDs are one of the lowest risk investments you could make. Your return will be minimal. But your money will be safe. And for the fearful, they may be just the short-term investment you need.

Related Content: Are CDs a Good Investment for the Average Joe?

Mutual Funds

Mutual funds offer some protection from the risks of investing in individual stocks. As I mentioned, one stock could falter. However, a whole host of stocks pooled together into one fund probably won’t all fail at once. That is what you get in a mutual fund. They are great place to start for someone looking at what to invest in when they are scared.

In mutual funds, investors pool their money together by placing it in the hands of an investment company. That firm invests all the collective money into a group of stocks (a fund) that is designed to meet certain objectives. The fund is managed by someone at the company. Investors see returns when fund’s value increases over time (because the individual stocks in the fund go up).

Keep in mind, mutual funds can go down in value if the market has a downturn. However, investors are given instant diversification because each fund holds so many stocks. Their money gets spread out over all the stocks in the fund instead of being invested in one company. So, if one stock does poorly, the fund is supported by the other stocks doing well.

If you’d like to know more about how to invest in mutual funds check out the related content post below. For my money, it’s the best place to invest for anyone – new, seasoned or scared.

Related Content: Investing Made Easy: How to Choose a Mutual Fund

Real Estate

You may not have thought of real estate when you were thinking about what to invest in. True, real estate isn’t a traditional stock that you trade. But real estate can be a great choice if you are scared about investing in the stock market.

And for most people, that initial real estate investment should be a home.

Generally speaking, real estate prices don’t move quickly. With a few exceptions, they tend to stay steady or trend upwards over time. Even if they fall, they tend to rebound over time. So, there is less risk of losing the money you’ve invested.

A home purchase acts as an investment because it forces you to save money. That happens as you make the mortgage payments and pay the house off a little bit more each month. Your equity (investment) in the house grows as you continue to pay. It may not seem as sexy as investing in the market. But paying down your mortgage month after month, year after year, is absolutely a solid investing practice.

Of course, you should evaluate whether or not you are ready to buy a home. But it’s a great place to be for those who are ready and may be nervous about putting their money in the stock market.

A Final Word on Fear

I’ve given you three alternatives on what to invest in if you are scared of the markets. Each has value. Each can work.

However, nothing will really work if you can’t conquer your fears.

Each of the options I listed still has some risk. But your fear may be so great you can’t even bring yourself to do these. You’d just rather have cash and stick it in your safe.

To that I’d say, that’s fine. You shouldn’t do anything you are uncomfortable with. You won’t lose money with that strategy, but you won’t gain any either.

The only way to make money with investing is to take risks. We all have to. NO investment is completely risk free. You can’t let fear drive your decisions.  

You can make money by investing if you have along term approach. So, let go of the fear. Be brave and invest your money somewhere. Outside of working hard and saving money, investing is the best option for growing your wealth.

Make a Comment Below: Do you ever worry or just have to guess about what to invest in? Is your investment approach working? How do you deal with your fears when the market is not doing well?

Image by Zerbor at Shutterstock.com

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  1. Personally, I prefer investing in real estate though it has low liquidity. It has long been proven that real estate is an excellent hedge against inflation and suitable for investors who can get weak at knees easily. Not everyone can have peace of mind investing in high volatility investments such as stocks, etc..

    • That’s a great point about inflation Desmond. There has been a few times when the real estate market was volatile (most recently in 2007-09). But those times are really outliers. Mostly it’s a stable environment to invest in which is why I like it. Thanks for the comment!

  2. I think these are all great ways to invest, especially for the conservative types. A friend of mine asked me about a CD the other day. I’ve always been against them, but when we discussed what her savings goals were, it actually made sense for her. And the rate of return was surprisingly high for a CD. This showed me that there is a right place for almost any type of investment.

    • CDs aren’t the greatest investment out there. They generally have low interest rates and therefore don’t offer a great return. But for someone who doesn’t like risk at all, they work. Very conservative and safe investment. Thanks for the comment!

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