The Psychology of Investing – Why People Fear Long-Term Plans

Why is Long-term Investment Crucial?

Investment returns are unpredictable and come with the possibilities of both profit and loss. However, when you stay invested for longer, you may ride out the lows and can expect better returns. In several instances, those who stayed invested for 10-20 years have shown better profits and fewer cases of losses.

Since the purpose of investment is to earn returns, it is a better choice to stay invested for longer. There are different types of funds; some may give better returns in 5-10 years, while some may perform their best in 10+ years of investment. So, depending on your preferences, you may choose funds accordingly.

In investment, past records may not have a major effect on the future. However, it strongly suggests that a longer duration of investments usually has a lower chance of losses. So, to avert risks and have enough time to cope with highs and lows, it is crucial to stay invested for longer.

Why Do People Fear Long-Term Investments?

Even though most of us understand the value of long-term investment plans, not everyone can invest for the long term. So, what are those reasons that accelerate long-term investment fears? Some of these reasons are listed below:

The Need for Liquidity

One common concern that may pull you back is “what if I need that money”, just like Ranjitha Sahu. Well, investment is definitely a commitment that requires you to leave that money for a while. Picking out of it may again affect returns. So, it causes panic in many people. What if they need money after some time, and it's no longer in liquid form?

Tip: The solution to this fear can be creating an emergency fund. In case of an emergency, you can use this fund. We have explained it further in this guide.

The Uncertainty of the Future

“What if I never get a chance to enjoy my money?”. Life is unpredictable, but hope is what keeps us going. With the fear of life's uncertainty, it may almost become impossible to plan anything. For instance, an employed individual starts planning their retirement income from a young age without knowing if they will be able to benefit from it. So, rather than fearing the negatives of uncertainty, you may think the other way round.

Remember: For many, investment is also about creating a pool of funds for their loved ones!

The Lack of a Plan

When you don't have a plan for the day, it's tough to even get out of bed. So, when it's about investment, an aimless direction cannot be the right approach. When you know why you are investing, it becomes easier to pass through the highs and lows and wait until your investments fulfil the goal.

Tip: List down your long-term financial goals to prepare a concrete investment plan!

The Past Experience

At times, investments can give a bitter experience to people. Due to a bad experience with an investment, some people may fear trying it again, especially for the long term. The weight of a bad experience can be quite heavy for some people.

Remember, all you need to learn from a bad experience is what went wrong. The idea of investment was not wrong, but just the choices of funds!

Tips to Overcome Long-term Investment Fears

You can always take steps to overcome the long-term investment fears. Some of the tips are mentioned below:

Set Clear Financial Goals

What are your long-term financial goals? List them down and start planning your investment accordingly. Setting goals gives direction to your investments and helps you stay invested for longer.

Understand Investment Terms

Many people may not understand certain investment terms. However, you need not worry as your broker or finance manager can help you understand these terms. It then becomes easier to surf through and choose the right investment plans!

Create an Investment Portfolio

‘Do not keep all your eggs in one basket’ is a popular quote! When you have an investment portfolio, you actually balance the risks of losses. Try to choose different types of funds so that even if one investment goes negative, the benefits from others can balance it out!

Build an Emergency Fund

Losing hold of liquid funds is one reason why some people fear long-term investment. For this, you may simply build an emergency fund. It gives you the peace of mind that you have a backup for emergencies and that your investments will be safe!

Seek Professional Guidance

You may also consult a professional for investment guidance. Based on your financial goals and risk appetite, they can suggest the right choices!

Over To You

Investment requires proper planning and understanding of your financial expectations. Above these, having a clear long-term financial goal is further helpful in maintaining disciplined investment for years. Additionally, you may also take help from a professional for a personalised investment guide.

If you are unsure about certain investment terms, we are always there to assist you. At Jio Insurance Broking, we can help you out with the right investment decisions. Our platform gives a detailed comparison between different funds so you can choose the most suitable plan. Connect with us today!