7 Tips for Increasing Your Self-Confidence About Investing

Is low self-confidence holding you back financially?

Posted Oct 29, 2018

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Let's dive into talking about some practical ways to increase your self-confidence about money and personal finance, with a particular focus on investments. 

1.  Recognize that success at investing doesn't require being special.

It's easy to look at people who are successful at personal finance and think they've got some special talent at it.  Try reframing other people's success in a way that's less intimidating.  For example, you might think of their success as a result of them doing enough of the right things to outweigh the inevitable mistakes everyone makes.

Try:  Write a sentence about what success at investing requires, making sure that it sounds reasonable and achievable to you.  Write your own statement in a way that's meaningful to you and sounds like something you'd say.  

2. Recognize that investing is something you probably do all the time, even if you don't think you do.

Most of us frequently make upfront investments that we expect will pay off in multiples later.  For example, when you buy eco light bulbs or a 10 lb bag of rice you're expecting that paying more now is going to leave you better off overall.  Outside of the money sphere, we regularly make investments of time in our relationships, careers, and in learning new skills, because we expect that those time investments will pay off in multiples later. 

If you've got low confidence about investing, it can help to recognize that almost every day you evaluate and make decisions about which investments are worthwhile and which aren't.  In fact, you might even notice that you do this multiple times per day.  Think about any time you calculate whether it's worth driving to Costco to buy cheaper milk.   If you consider yourself to have no skills at evaluating investments, you've probably got more skills than you think.

3. Outline your strengths and weaknesses.

What skills are you good at that are relevant to investing?  Think broadly.  Some possible examples:

  • you're good at reading documents thoroughly 
  • you're great at researching different options
  • you excel at asking questions
  • you're good at sticking to things once you've committed to them
  • you're prone to skepticism and are not easily taken advantage of
  • you're good at developing relationships with others

As well as thinking about your strengths, also think about your weaknesses.  Again, possible examples:

  • you can get over-excited and carried away, and leap into things
  • you're easily rattled by small things that go wrong
  • you find it difficult to act when there is any element of uncertainty
  • you struggle to ask for what you want
  • you tend to be too trusting and gullible in the face of expert sales people
  • when you get anxious you tend to cognitively shut down and find it difficult to process numbers and math

Try: Come up with a list of all the skills that seem relevant to investing to you, then rate yourself on those skills.  Phrase the items on your list in whatever way seems most obvious and meaningful to you.  There's no exact right and wrong way to do this.

4. Question the weaknesses you think you have.

My aim in making this point is to help you reach a realistic assessment of your weaknesses.  Start by considering your hang-ups about what you think is holding you back.  Challenge those insecurities a little.  There might be grains of truth to your self-perceived weaknesses, but is your negative self-perception overblown?

  • If you have a weakness, it might be a more limited weakness than you perceive it to be.  For example, you might have a hard time asking for what you want under some circumstances but not others. 
  • In my book, The Healthy Mind Toolkit, I encourage people to look for where they have pockets of strength within general areas of weakness.  For example, you might be great at networking over email but not in person, but you erroneously label yourself as globally bad at relationship building.   

Try:  Ask yourself:  "What are my pockets of strengths within my general areas of weakness? How can these help me with investing?" 

5. Come up with a practical plan that mitigates your weaknesses.

Although it seems counterintuitive, realistically evaluating your weaknesses can help you feel calmer.  For whatever weaknesses you have, brainstorm ways some you could counteract those.  Think both broadly and specifically.  Here are some examples:

  • If you have a hard time acting in situations involving any uncertainty, maybe you could start investing in a way that's so small that your fears of loss and uncertainty aren't excessively activated.  For example, you try investing $100 just to go through the process.  Still stuck?  Keep shrinking your first step until whatever point you don't feel paralyzed by anxiety.
  • If there is some skill you're not good at, perhaps that's something your spouse or partner is better at?
  • If you tend to get carried away and go too far, too fast,  how can you put a brake on that?  Make a specific plan, like a limit you and your spouse/partner agree on, and then hold each other to.
  • If you're fearful, perhaps you could start investing in ways where there's very little likelihood of losing, for instance, some people can take advantage of company matching for retirement savings where they're getting such a great head start from the company match that it would be hard to go wrong. 

6. Think about how you'll use your strengths.

I've talked about identifying and mitigating your weaknesses.  On the flip side, you'll also want to consider how you can use your strengths to accelerate your progress.  In her book about self-confidence, my colleague Dr. Barb Markway defines strengths as skills you enjoy using regardless of the task.  Do you love researching?  Do you love thinking big?  Do you love taking a slow and steady approach to goals?  Do you love developing relationships with new people? 

Try: Whatever your strengths are, come up with a practical plan of how you'll deploy those to enhance your skills and progress towards your goals.

7. Recognize that perfection isn't an option.

I like investing and usually make pretty good decisions, however after reading a new book about real estate recently I noticed that my feelings of confidence plummeted.  Why?  The book had lots of warnings about what not to do and pitfalls to avoid.  These were smart and helpful, but it also made it feel impossible to get it all right.   

Try: Notice any perfectionistic thoughts you have and how these impact your confidence.  Start with the baseline assumption that it's impossible to make perfect decisions or time the market perfectly etc.

Take Home Messages

  • If you think you have no skills or experience with investing, you're probably not thinking about it broadly enough. There are many everyday life skills that are relevant to investing success.
  • Knowing your strengths and weaknesses can help you succeed at investing, but only if you make a realistic assessment of what those are.
  • If the only thing you consider a success is perfection, you'll probably feel stuck and excessively anxious.
  • If you feel stuck getting started, make an extremely small investment to experience going through the process.  As I often say, behavior is the best and fastest way to change your thoughts and feelings (see here for more)!