Why is it so hard for people to start investing? It is a question that I have asked myself many times throughout my extensive professional career in the investment industry and today I have come to the conclusion that the answer, which is complex and multiple, has gradually got simpler in current times.
In effect, apart from obvious factors, such as the lack of sufficient savings, the other elements that could explain the inertia towards the investment practice have to do with social, behavioral, and educational aspects that in recent years have strengthened.
Unfortunately, I have not been able to find research that sheds scientific light on the matter, so the following are exclusively personal hypotheses, based on the observation of what is published on social networks, conversations with real and prospective clients and what I can perceive simply by being in contact with anyone who is not an investor, and even with members of one's own family.
Without wanting to hierarchize the importance of the factors, I point out the following:
Misinformation and/or educational deficiencies
It is notorious that worldwide, in school education courses there is a marked absence of subjects related to personal finance, to the point that basic financial mathematical functions such as present value, future value, simple interest, compound interest, etc. are concepts totally unknown by the majority. This factor leads to the following element:
Increase in the general level of quackery on the subject
One of the most resulting aspects observed with the rise of social networks is the proliferation of self-qualified experts in investment and financial markets. The presence of such characters has always existed, but social networks have allowed their exponential reproduction since they are media where you can easily connect with people who are easy prey. This factor contributes and provides feedback to the first one I mentioned, making the work of true professionals increasingly complicated, who must begin by clarifying basic terms and their differences, such as saving, investing, trading, speculating, etc. And, within this panorama, another factor is added that is becoming more important every day:
The exacerbated attention in the short term and in the immediate results of each human action
Life today spins faster and faster and we are all subconsciously biased to expect immediate answers. We expect an earlier reaction to each of our actions, be it when we send a chat message or an email, when we buy something or take a remedy; all must give us a response very soon. In this context, which is accelerating more and more, the practice of investing, which presupposes discipline, patience and postponement of the reward in terms of time that are measured not in minutes but in decades, investing is certainly not very "sexy". And to this, I add another aspect that was already mentioned by the author Stephen Covey in his famous book The Seven Habits of Effective People, which is
The confrontation between the urgent and the important
The concept refers to the difficulty that we all naturally have in knowing how to distinguish between things that we must deal with "urgently" and those that are "important" and the bias that pushes us towards the former. Investing is a discipline that does not seem to be urgent (and it is not) and therefore tends to be displaced in our order of priorities by other activities that seem more deserving of our attention. And this is where our performance fails, because investing is IMPORTANT, as countless evidences show. However, only effective people understand this difference and are consistent with this reflection. These are the people who will get ahead of the rest.