The stock market is a great place to build wealth over-time. With proper knowledge and understanding, it becomes fairly easy to make profits and mitigate losses. However, many in developed countries also refrain from investing in stock due to the common myths about the market.
Unless you try to understand and actually start investing, it becomes difficult to convince someone about what’s true and what’s not true. To put your mind at ease, here are some of the most common stock market investing myths that are stopping you from beginning your investing journey:
You need to be rich to invest in the stock market
Making losses in the early days of investing is not the way to learn how a market works. This is not the right way to approach stock market investments. Every smart investor begins investing with a sound strategy. And the only to come up with a sound strategy is through adequate knowledge.
Furthermore, technology and the internet have made the stock market more accessible for beginners. Discount brokerages and robo-advisors also allow investors to invest in a minimum amount.
Investing in Stocks is similar to Gambling
Investing in the stock market requires a lot of research and investors also need to look at factors like company history, future of the company, financials, news, etc. All of these factors together lead to one deciding whether it is a good investment or not. On the other hand, gambling is merely a game of chance or luck.
An Investopedia publication says that gambling takes money from a loser and gives it to a winner. No value is ever created. As companies compete, they increase productivity and develop products that improve lives. Investing also increases the overall wealth of an economy. Investing and creating wealth should not be confused with gambling’s zero-sum game.
Stock Market is a place for experts
When you begin to invest, as a beginner you are bound to make certain mistakes here and there. Investing in the share market certainly requires developing certain know-how of the market and identifying the right shares for your risk appetite — IIFL. But this process of learning is continuous and develops over time.
After you’ve been engaged with the markets for some, you develop your confidence and decision-making ability. The best way to understand the market after learning about it is to actually start investing.
A little knowledge is better than none
While it is true that something is better than nothing, this can do more harm than good when it comes to the stock market. It is also certainly true that investing requires a lot of effort and patience. You should only invest in investment tools and companies that you completely understand. Investors feel that the stock market is a very complex place only because they invest with partial knowledge. If you cannot contribute the required time and effort towards it, you can always hire a financial advisor who can advise you about your investment decisions.
High risks equal to high returns
Investing in the stock market comes with some amount of risk attached to it. Generally, investors feel that high risks mean higher returns. It is true that this can work in favor of some investors but it certainly doesn’t mean that everyone can get away with it. If investing in the stock market were so simple, then everyone would be Warren Buffet.
High-risk investments carry just as much chance of losing big as they do of winning big. It requires caution, patience and research to find a high-risk investment that you can place your faith and finances in.
Like every other investment vehicle, to successfully invest in the stock market you need to do your homework and be mentally prepared for anything that comes in your way. Successful investing is not very simple, but with proper knowledge and looking past these myths, it is certainly achievable. You can start off with setting a proper investment goal in your mind and then choose an investment strategy that will help you achieve that goal comfortably.