Investing in the share market is a risky business especially if you are a beginner. Even experts are often surprised because of the uncertainty in the movement of the stock prices. Along with risks, there are so many myths about stocks just like there are about online trading. This information doesn’t just confuse investors but hit their returns.
Today, let’s discover 10 myths about investing in share markets. Learn how to overcome them to earn more returns.
Myth #1: A Lot of Money Is Required to Invest
Well, not really. The only part that’s true is that you need money to invest. You can start with as little as $5. As long as you have money, you can invest in the stock market.
Myth #2: Stocks Are Riskier Than Bonds
Since the stock market is extremely volatile, many investors end up believing this myth. If you look at the stock market in the long-term horizon, it’s actually quite consistent. As long as you have a diversified portfolio of high-quality stocks and even stocks with a low risk, you are good to go.
Myth #3: I Can Get Rich with Stock Market
To be honest, some investors step into trading with this mindset regardless of the type of investment. It is absolutely true that the stock market will reward you in the long run. But you must remember that the market has its own rules. It takes money from greedy and fearful investors and gives it to those who are rational and balanced.
So, if you think it’ll make you rich, forget about making any money at all.
Myth #4: Invest in What’s Hot and You Will Make Money
Do not ever fall for this. If you are investing in what’s hot, you are actually following the crowd. You won’t get anything out of such an investment.
Myth #5: Let a Broker Take Care of Your Investments
It will be one of your biggest mistakes to believe someone who is charging you for managing your stocks has your interest in mind. Brokers get paid by stock promoters if you buy certain stocks. Just because they have a financial background and a nice office, doesn’t mean they are the best people. These individuals may be more experienced and knowledgeable than you. Don’t ignore the reality that it is you alone who can make the best decisions for yourself even if they pertain to the stock market.
Myth #6: Past Performance Guarantees Returns
The past performance of a stock is an important indicator of its future. But it’s never wise to believe that it will continue to perform like that. The traders who attempt to chase the hottest stocks are guilty of believing this. In the end, they are burned when the stock experiences regression.
Do not ever try to guess the trends in stock on the basis of its past. Always make a decision on the basis of sound research and, of course, considering the quality of the stock.
Myth #7: If the Media is Reporting a Stock, It’s a Good Time to Buy
NO, NEVER! In fact, whenever the media is covering a stock, there are some things you must keep in mind. It’s being covered only to increase its market volume or even price. And honestly, if you got news about a stock from the media, it means you are late to the party.
The news is usually old by the time the media starts covering it. So, you shouldn’t plan on investing in the particular at that time.
Myth #8: You Have to Be a Genius to Make Money in the Share Market
If you are a first-time investor, you might be a victim of this inferiority complex. And maybe because of that, you haven’t been able to test your potentials. Truth be told, you don’t have to be a genius to invest and earn. The only thing you have to be is reasonable. In other words, you must have control over your emotions.
Age has nothing to do with taking home returns. It’s all about making the right choice.
Myth #9: Buying Stocks Is like Gambling
Those who believe stocks are riskier often also believe that investing in them is similar to gambling. If you are thinking short-term, then yes, it is like gambling. Why? Because you are placing highly concentrated bets on stocks that come with high risk. Such people expect to earn a jackpot just as a typical casino gambler would.
Investing in stocks isn’t gambling and it should not be treated that way. If you want a decent long-term payoff, you must diversify your portfolio with blue-chip stocks.
Myth #10: Higher Risk Means a Higher Return
You will hear a lot of players in the stock market saying no pain, no gain. No wonder many newbies end up taking higher risks expecting more returns.
Investing in stock because there is a higher chance you will win can make you lose big time. You never know it flops and you lose your investment. Such an attitude isn’t called investing, it’s called gambling.
The Bottom Line
In the stock market, knowing just a little will only have you follow the crowd. Successful investors always work hard and use the right trading softwares to make a decision. They never trade when they are only partially informed.