3 Ways to Get Over Your Fear of Investing in Stocks

Keeping your money in a savings account might earn you a decent chunk of interest over time. But if you really want to grow a lot of wealth, investing in stocks is a smart bet.

Over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the performance of the S&P 500 index. This means that if you were to invest $10,000 today in S&P 500 stocks, sit back, and do nothing, in 40 years, you'd be sitting on almost $453,000, assuming that same 10% annual return.

But there may be something stopping you from buying stocks -- fear. And that's understandable.

The stock market can be extremely volatile. And you could easily see the value of your portfolio swing wildly from one day to the next. That's an unsettling thing, since it's your hard-earned money at risk. 

But you might need stock investments to meet your long-term financial goals. So it's best to work past your fears and start putting your money to work. Here are a few steps you can take.

1. Start slowly

If you were scared to ride a bike, would you start by signing up for a 15-mile ride or pedaling around in a vacant parking lot for a bit? You'd probably choose the latter. 

Similarly, if you're nervous about owning stocks, don't go all in right away. Invest a few hundred dollars to start with and see how that goes. You may be less nervous about losing money when there isn't as much to lose.

2. Buy fractional shares

You might feel better about buying stocks if you start by only owning pieces of them. Fractional investing allows you to do that.

Most brokerage accounts these days allow you to buy stocks on a fractional basis. So, let's say you're interested in buying shares of a company that are trading for $500 apiece. If the value of that stock falls by 10%, you're out $50. If you buy one-quarter of a share of that company's stock, you're only putting in $125. If its value drops 10%, you're out $12.50. 

Of course, it's worth noting that you're never officially out any money in your stock portfolio until you actually sell your shares at a loss. But still, you may find that fractional shares are less of an initial commitment, which may be a good thing if you're skittish about owning stocks.

3. Diversify

The more diverse a portfolio you have, the more protection you can buy yourself against market volatility. If you own a few dozen stocks and one loses value, it might have a negligible effect on your portfolio. But if you only own five stocks and one utterly tanks, the impact may be more noticeable.

Similarly, it's a good idea to invest in different industries so that if one experiences a shake-up, you'll have plenty of other investments on hand that may not be affected. An easy way to build a diversified portfolio quickly is to add some shares of an S&P 500 ETF, or exchange-traded fund. This way, you're effectively investing in the 500 largest publicly traded companies.

It's natural to be afraid to put money into stocks. But working past those fears could be essential to meeting your long-term goals, so do your best to get on board with the idea of becoming a stock market investor.