Many people let myths about investing delay their journey toward financial independence—but you don’t have to! The sooner you can recognize these 5 myths about investing, the sooner you can jumpstart your journey toward financial freedom:
Myth #1: You’ll never be able to retire.
Most people think they will never be able to retire because they don’t think they have enough money to make investing worthwhile.
But the truth is that you absolutely can afford to retire even if you don’t earn a high income. That’s because the most important ingredient for wealth building isn’t money—it’s time.
It’s not necessarily the amount that you invest that matters—rather, it’s how long your money is invested. The longer your money is invested, the more compound interest you earn, the more your wealth grows.
That’s why a lower-income or median-income earner who invests for decades could potentially build significantly more wealth than a high-income earner who only invests for a few years.
Myth #2: FIRE is only possible for high-income earners.
Although having a high income isn’t a requirement to FIRE, it does help you retire earlier. And while high-income earners could potentially retire in their 30s or 40s if they aggressively pursue investing, this simply isn’t a realistic portrait of what early retirement looks like.
If you’re not a high-income earner, you could still retire early. Retiring in your 50s or early 60s is a more realistic picture of early retirement, and it is possible for average-income earners who make investing a priority.
Myth #3: You need to be an expert investor to invest your money.
Investing fundamentally is simple and easy—anyone can do it. Most people need just 1-3 low-cost, broad-based index funds to build toward financial freedom. You don’t need tons of different funds and you definitely don’t need to be a stock market expert to build wealth.
Investing is so simple that you can just set it and forget it:
- Pick 1–3 low-cost, broad-based index funds.
- Choose how much you want to invest.
- Decide how regularly you want to invest.
- Set up recurring automatic deposits to your investment account.
- Set up recurring automated investments.
Myth #4: Investing isn’t worth it unless you can invest at least 20%.
While investing at least 20% of your income is ideal, it’s simply not possible for everyone, given that 23% of people in the United States earn $17 an hour or less.
The truth is that making small, slow progress could still pay off to the tune of tens of thousands or even hundreds of thousands of dollars across decades. That’s because the most important ingredient for building wealth is time, not money.
If you can’t afford to invest 20%+ of your income, start by making incremental, slow progress and investing what you can. Then increase your contributions when you’re able.
You don’t need a high income see the benefits of investing. Check out how investing just 1% to 5% more of your income could skyrocket your wealth by the time you retire, even if you earn $35k–$55k a year:
- The Power of Investing 1% More
- The Power of Investing 2% More
- The Power of Investing 3% More
- The Power of Investing 4% More
- The Power of Investing 5% More
Myth #5: Investing is expensive and unaffordable.
Most people don’t invest because they believe that they don’t have enough money saved up to get started: 73% of Americans believe that you need at least $1,000 to start investing.
The truth is that you can start investing as little as $1 at a time. Most brokerage firms offer fractional shares, so if you can’t afford to buy a whole share, you can just buy a fraction of it at whatever amount you can afford.
And you don’t need substantial savings—or even any savings—to open your first brokerage account: Many brokerage accounts have no minimums, so investing is truly accessible to everyone.