Why don't more people invest? Great answers from Quora

I found myself nodding my head constantly through this. It makes a ton of sense since I have a circle of friends that constantly max out their credit cards and have little to no money saved… You can only help those if they’re willing to take your advice. It’s otherwise best try not to convince them (I mean this in the most generalized way possible).


Answer 1:

Of course, if you can’t save, you can’t invest, so we need to get past this point first.

But, assuming someone can save, I would argue that many people don’t invest because of fear and ignorance.

Having lived through the investing train wreck of the 2000 - 2010 decade, the worst decade for investing in 70 years, many are understandably frightened.

Most people have little to no knowledge about stock market history, the long term, constant upward drift of the stock market, and the fact that over the long term the stock market has consistently proven to be the best possible way to invest to accumulate wealth. And what little history they do know is mainly the negative stuff, the '29 crash and stuff like that.

Also most people don’t know how the stock market works, don’t have a brokerage account, and have never owned stock outside of a company 401K plan, and there are a lot of working people who don’t have access to even that.

There’s a common perception that the stock is a zero sum game, and is essentially gambling. And if you don’t know what you’re doing, if you try to be a day trader, or you attempt to pick stocks on advice from your friend, or barber, or whatever, it basically is gambling.

To invest for wealth accumulation you need to invest for a long time, at least 10 years, and preferably 20 to 40 years. Many people just don’t have the emotional makeup to watch their investments pitch up and down like a ship in a storm for those types of time frames.

Yet if they were educated about the long term potential, if they took advantage of dollar cost averaging, if they invested in low cost broad market ETF’s and left them alone, they would do just fine.

I also agree with Mark about people not taking advantage of their company’s 401K plan, especially when the company pays a match. That’s just plain dumb.

Finally, I disagree with Tom Wayne. The tax code does encourage investing. Taxes on both long term capital gains and qualified dividends are lower than taxes on ordinary income for 99% of the population. The rich know this. If you have enough money invested to live off of, you’re better off, from a tax perspective, deriving your income from investing than from salary.

- Jack Woida, Have an MBA in finance; high tech executive; investor for 20 yrs.

Answer 2:

To invest, one needs to delay immediate gratification and invest in themselves (sometimes called savings). When people live beyond their means and are deeply in debt, one needs to first crawl out of debt before investing. Investing for single digit returns while paying 18+% on credit card debt makes no sense.

I am always surprised how many people do not invest in their company’s 401K that has 1:1 or 1:2 matching up to the first 3-6% of their income. In the case of a 1:1 match, it is a risk-free immediate 100% return on one’s money. How could someone pass up that investment? Oh wait, they need to buy a used car instead of a new car and eat in to have the money to match. Next year or after my next raise or whatever. I have known people who had to get another credit card so that they could take a vacation as all their credit cards were maxed out. They were not investors.

End of rant.

- Mark Neuhausen, Serial Entrepreneur, Tech Partner, Angel Investor

Answer 3:

Most people that do not invest do it for one of two reasons. The first, and most common is that they fall into a cash flow mindset (planning a budget around things like I can afford x monthly payment for a car ect.) and since they have never taken a finance class, and do not think like a banker, the prospect of long-term capital gains realized during an unwind/planned sell-off are totally foreign to them.

These people unfortunately also tend to fall into status symbol traps. The second and less common type I’ve run into are people that can afford (from a cash flow basis) to invest but do not because they believe they will lose money. Over the long-run this is mostly nonsense barring some events like a planned sell-off happening during a bearish crash ect.

At the root of this fear is a lack of trust in financial professionals combined with an unwillingness to investigate and use passively managed nearly fee free asset classes (ETFs ect.) The irony of all this to me as a recent grad working in field is that the people that know the most about the newer, more liquid and inherently more diversified assets are also the ones with more risk tolerance. To a common person, finance is scary and full of thieves essentially.

- Frank Hornbacher, BA Finance & Economics, University of Washington (2017)


Answer 4: the masses are in so much debt, living beyond their means, they don’t have anything spare to invest and have been brainwashed to go out and spend money they don’t have, using credit cards and other forms of loans, to buy stuff they probably don’t even need. Without this, the system would collapse.

Marketing is a powerful tool.

Stay Fishy


I feel like people on the internet have no idea what true investing is all about

1 Like

I agree. I feel people thing that investing in general is going to be something super easy and you will be able to just earn money super fast. I feel like people need to know the basic tips to save money before they jump into the investing dance. I don’t know why people think that investing is something easy and cheerful that requires minimal work and will bring them a ton sh** of money. But even if they do get lucky they will just end up losing it all. They have no idea how to keep the income and how to actually multiply it. No amount of tips to save money will help them I’m afraid.

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