As you develop your financial knowledge, it is natural to want to learn more about investing. After all, investing is a proven method of increasing wealth, so who would notdo not want to participate in this?
But there are several common myths that can deter you from investing. By clinging to these myths, you can even lose Money.
1. Investing is too confusing for ordinary people.
If you’re new to this, investing can be confusing. There may be many terms that you do not understand, and you may feel that it takes a degree in finance and a Wall Street job to figure it all out. But it doesn’t have to be difficult.
In fact, if you have a 401 (k) at work, you already investment. In fact, investing only needs two things: some money and something that can be bought or invested in the hope that it will cost more later.
Until you learn more, it’s best not to overcomplicate the task. If you are already investing through 401 (k), keep up the good work or do more. If you would like to invest further, check out the investing concepts for beginners in our article: How to Invest: Important Tips to Get You Started with Investing…
As always, decide for yourself after you’ve done your research, and don’t let anyone force you to make a decision you’re not sure about.
2. You must have a lot of money to invest
Investing can seem like a real insider club – a club that needs a lot of money to be a member. But this is not at all the case. You can open an account for as little as $ 1 or $ 100 and only buy what you can afford. And with a large number of brokerage companies, trading commissions have dropped to or close to zero, so it won’t cost an arm and a leg to make a deal.
One way to invest, if you don’t have a lot to spare, is to use an online platform with low fees and minimal account minimums. You have access to a wide range of securities to trade without eating up your gains as expenses.
More details: The best robo advisors of 2021
3. If you pick the right stocks, you will get rich.
Some people think investing is simply picking the right stocks and doing nothing when they skyrocket in value. These are the people who always scold themselves for not buying Apple in the 1990s or Amazon when it first went public.
Surely picking a runaway winner is a great way to get rich over time. But if it were that easy, everyone would do it. Plus, even stocks that look amazing now, in retrospect, have had their own fluctuations with huge drops in value.
From 2007 to 2009, Apple shares fell more than 50%.… If you put all your money into this promotion, you would no longer have a chance. And if you then sold, trying to contain your losses, you would really go backwards.
All this means that choosing the “right stock” means a combination of market timing and vision of the future – neither is possible. Making money isn’t always easy, and you risk losing everything if you put all your eggs in one basket. Choosing what appears to be popular right now is not the right tactic, so again you need to carefully scrutinize your investment and balance risk with upside potential.
4. If you want to invest, you need to hire someone.
Some people believe that if you want to invest, you have hire someone to do it for you – and who has that kind of money? Not all of this is accurate. But you don’t need to have a stockbroker or hire a consultant to invest your money for you. You can do it yourself.
For example, Robin the Hood is an online platform for so-called “do-it-yourself” investors: people who take investments in their own hands, executing their own trades on their own schedule. V Robin the Hood, bidding without commission, leaving more money to invest.
There are many robo-advisers and self-trading apps out there that don’t cost thousands of dollars to use, and are actually light use. You can find the list in our Best investment apps article.
5. If you can’t get the timing, don’t worry.
A lot of the talk about investing has to do with what the market is doing. Is it up? Am I sitting down? While it is important to know the general climate you are investing in, as well as the overall performance of your specific investments, all talk of market movements can make some people feel like they will never get the timing right.
More details: Why you shouldn’t worry about the stock market going down
In reality, the value of individual securities and markets as a whole will always fluctuate. Nothing is static and the values change every minute. Waiting to jump into the water is like waiting for the river to stop: it will keep moving whether you are ready or not, so you can jump as well.
If you join the theory Buy and Hold Investingwhere you buy an investment and hold it for a long time does not really matter much whether you buy in July or November, because you will be holding this investment for years, if not decades, especially if you are a younger investor. This method gives your investment plenty of time to overcome the volatility of individual spikes or dips in value.
Likewise, if you follow dollar value averagingwhere your investments are consistent and regular over time (for example, when using an automatic investment plan through your broker), then you end up averaging the price of the investment you buy. If you buy regularly, you can buy the investment at a higher price this month because the stock is going up, and at a lower price the next month because the stock is falling, but over time the price and value on average decrease.
More details: Explaining dollar value averaging – is it a smart way to invest?
6. Investing takes a lot of time and effort.
When you think of “investing,” do you imagine someone glued to their phone, tracking every rise and fall of the stock market, panicking over prices?
If you’re worried that investing is a commitment you simply don’t have time for right now, rest assured. You can invest with little or no user intervention by simply checking your investments from time to time. – even once a year if you invest for a long time.
You don’t need to look after your investment. You don’t have to trade every day. In fact, you can make a well thought out purchase, possibly in a mutual fund, index fund, or ETF of which you are confident, and leave it for the accumulation of value.
There is no need to follow the markets all day long and feel the pressure to pay attention to every moment.
If you’re unsure where to start, check out the best options in our article: Best investment accounts for young investors…
7. Investing is the only path to wealth.
There is a certain narrative that investing is the only path to wealth. It might seem like all you have to do is invest big in one good stock and you’ll go gold, but that mindset is right where addiction to winning the lottery is your retirement plan.
To be able to use your investments to build wealth, you need to consider other aspects of your financial plan. You must have a reliable income and spend less than you earn. Make sure you set aside a reasonable percentage of your income and are ready for retirement. with a retirement account (or pension if you’re lucky).
More details: How to determine which retirement account to open first
Work hard to reduce and pay off debt, especially debt with high interest rates; once your loans are paid off, you have more money left over to invest. And keep improving so that you have something to offer the world. No bull market lasts forever.
Plus, investing is not a magic ticket, and there are no guarantees. You might be the world’s most prudent investor – and then something really unexpected happens that turns all established advice upside down (like a global pandemic!).
There is always risk when investing, and you must be prepared for it.
Not sure what your risk tolerance is? Go to our article How to determine your investment risk tolerance To learn more.
Summary
Investing may seem like a daunting topic, but it doesn’t have to. It’s easy to get bogged down in myths about investing and sometimes it’s hard to know what’s true and what’s not. Understanding some of the common truths about investing can help you separate fact from fiction so you can make informed decisions and multiply your money.