Why you aren't investing

Inspired by this recent Get Rich Slowly entry, I wanted to talk about all the reasons I hear from friends and family about why they don’t invest. People miss out on incredible opportunities to grow their money, and are so often left scrambling later in life to save enough money for retirement. I hope that this list will help people feel a bit less intimidated, and a bit more motivated to get started.

“Investing is just gambling”

I really don’t like this statement, primarily because of the word “just.” With this statement you are saying investing in the market is no better than blackjack or the slot machine. The truth is is not so simple. Investing CAN be similar to gambling, if you pick stocks based on “gut feeling” or a “hot tip.” But if you follow a well-studied investment strategy, like investing in broadly diversified index funds, the risk is far less than gambling. In fact, gambling (at least in a casino) is guaranteed to be a losing game in the long run, whereas index investing historically is a net positive over time. Check out this Vanguard study of index-based investment over time.

“I’ll invest when I have more money”

A lot of people put off investing until they feel like they have enough money. But ask yourself: how many times did you go out to dinner last month? Or go out for beers? Or drink a latte? Well, if these are greater than zero, you have some spare money to invest. 

Vanguard index funds let you contribute ANY dollar amount per month once you get past the minimum. Their target retirement funds only require $1000 to start (if that's too much you can buy shares of the Total Stock Market ETF for about $100, but I recommend the mutual fund). If you get this fund started and contribute even $10-$20 at the start of the month, you will be surprised to find out that you DO have enough money to invest.

“Investing is for the rich”

Do you really think only the rich deserve to see their money grow and have a comfortable retirement?

“Investing is too complicated”

I really empathize with this statement. We are constantly bombarded with TONS of financial noise. We hear about people making a fortune betting on random stocks. We hear about all the types of investment accounts and stock brokers and financial products, not to mention stock “picks” from relatives and friends. It makes us feel that unless we are smart enough to “beat the market” then we shouldn’t even try! It all seems so complicated. But the it doesn’t have to be. It really IS easy to get started using the index fund approach. 

The Bogleheads wiki pages are a great place to get started!

Kickfurther: Get $5 to invest in small business inventory (and earn 20-30% APR!)

Get $5 to invest in small companies!

I'm always looking for interesting alternative investments, and I came across a really cool one called Kickfurther. Basically, this is a startup helping small companies bypass traditional funding for purchasing inventory. These companies don't have enough capital to buy new production rounds (e.g., they got funded on kickstarter but now want to sell round 2,3...) so they usually get a bank or factory loan which costs them big $$. With Kickfurther, individual users can contribute $$ to help businesses they like and in return get some interest. Individual offers get you 5-10% interest but you get paid back over 3-6 months, so you can reinvest quickly and get 20-30% APR! That's pretty awesome!

Question: What if the inventory doesn't sell? Well since you are actually purchasing the inventory, so if the business can't sell you can still liquidate. Kickfurther helps you do that (they also sell on their site). More info about how it works at this link.

I like that this is a real investment, allowing you to get a substantial return for helping companies that you believe in. After getting paid back on the first offer I did (an organic body care company, made 10% in 30 days!) I put a lot more in. Here are some tips:

• You should only put money in an offer if you feel the product and company are a good investment. The interest they're paying you is to compensate for the risk. But note that you can help market the product too! I try to only invest if it looks like they have some established sales.
• Diversify! Rather than putting it all in the highest-interest offers, spread the risk around into more companies.
• There is a 1.5% withdrawal fee, but that's only charged when you take the money to your account. I usually reinvest instead though!

Check them out here using my link and you'll get $5 to start investing!

What is the Frugal Octopus?

This a site all about finding interesting non-traditional investing opportunities. I keep most of my investments in index funds, but with about 20% of my money I like looking for new opportunities. Why not just dump it all in the market? Because I like to have more control over my investments, and explore the cool innovations out there! Stay tuned for more interesting investment ideas!