Investing can be a great way to build wealth and achieve your financial goals – whether that means retiring comfortably or saving for your kids’ college education.
There’s no better time to start investing than now. We have more investment resources and opportunities at our fingertips than, say, a decade or two decades ago.
However, even with these shifts in the financial landscape, myths about investing make some people hesitant about getting started.
Thanks to the internet, unsolicited advice is quite easy to come by. Myths and half-truths can be – at best – restrictive beliefs for investors.
This article will discuss 5 of the most common investment myths that have stuck around over the years and their corresponding non-fiction. Every investor has encountered at least one of these investing myths at some point during their investing journey.
You Need Loads of Money to Get Started
This is probably the most persuasive investing myth, and I understand why it has staying power.
Back in the day, investing wasn’t available to everyone. You’d have to pay a broker to execute trades for you, and the fees and commissions kept some people from investing.
Also, popular movies about Wall Street portrayed investing as a super exclusive club – a club that was reserved forthe Lamborghini-driving stockbrokers and cashed-up CEOs.
Nothing could be further from the truth. Anyone can start investing these days. While you technically need at least some capital to invest, it doesn’t have to run into thousands of dollars.
In recent years, many platforms meant to help regular investors get into the market have popped up. You can even invest with pocket change.
The internet has also made the stock market much more accessible to the public than ever before. The data and research tools that were previously accessible only to brokerages are now available for individuals to use.
Investing Is Too Complicated or too Time Consuming
A good number of people don’t invest because they feel like they lack enough knowledge or that investing will take too much of their time. They often think investing involves pouring over balance sheets for extended periods to evaluate and make calculated decisions.
To some extent, investment can seem overwhelming for beginners, especially considering the industry jargon and numbers that appear non-decipherable. When exposed to things like asset allocation strategy and portfolio rebalancing, it’s only natural to think investing is not for everyone.
The thing is that investing can be as complicated or as simple as you want it to be. You don’t need to be a financial professional or have a financial degree to start investing. Acquainting yourself with some investing basics can help you make informed choices about your money and grow your confidence as an investor.
If you want a hands-off approach, Robo-advisors*can help you put together and manage a diversified portfolio with little monitoring. This way, you won’t need to spend time picking the “right” stocks/funds or building a portfolio from scratch.
*Robo-advisors are apps that use algorithms and data to invest on your behalf based on your risk tolerance, investing goals, and time horizon.
The Higher the Risk, The Higher the Rewards
Beginner investors are often willing to take on higher risks with the hope the rewards will be exceptional.
In reality, no investment comes with guaranteed returns. The risk of losing money will always be there.
To meet their investment objective, seasoned investors often sit on mid-to-low-end investments on the risk spectrum.
Likewise, it would be best to consider the diverse range of investment avenues available to grow your wealth.
Investing in Stocks Equates to Gambling
This is another myth accepted by those outside the investing universe that causes many people to shy away from investing.
On the surface, it’s easy to see why people would equate investing in the stock market to gambling. Both involve risking capital without a guarantee of getting gains.
To understand why investing in stocks is intrinsically different from gambling, let’s look at the basics.
A stock represents ownership in a company. The holder is entitled to a claim on the assets and a fraction of the company’s returns.
Investors in the stock market are always trying to assess the profit that shareholders will receive, hence stock price fluctuations.
While a company can survive without profits due to future earnings expectations, no company can fool investors forever. A company’s stock price will ultimately show the true value of the firm.
Investing in stocks doesn’t equate to gambling since the former is mutually beneficial to the company and the investor. In contrast, gambling merely takes money from a loser and awards it to a winner. No value is ever created.
It’s Better to Stash Away Money in A Savings Account Where It’s Safe
It may feel safer to leave your money in a savings account during times of market volatility. Putting your savings in a bank means that your money is insured up to a certain dollar amount.
While there is a low risk of losing your deposits, saving your money is not entirely risk-free.
Look at it this way. Despite your savings earning interest, inflation can gradually erode their value. The interest your savings earn may fail to keep up with inflation.
When you invest, you have a better shot at earning a better return than what your savings account could yield you.
It’s worth mentioning that savings and investing are not mutually exclusive. Both options can help you attain your financial goals. The secret is finding the right balance between how much money to save and how much to invest after you’ve accomplished your savings goals.
Conclusion
Investing myths could hold you back from investing and reaching your long-term financial objectives.
Don’t allow folktales to drag you down. Instead, start your investing journey today as an informed investor!
