5 Myths About Investing – Debunked
Myths about investing are everywhere. Some will scare you away from it entirely, while others will trick you out of your money. Others will have you believe that you need to take on too much risk, or not enough. A few even seem to promise guaranteed success, but rarely live up to the hype.
With all of the myths about investing circulating, how are do you find the truth? To help you do just that, here are five myths about investing debunked.
1. Investing is Just Like Gambling
It is true that investing and gambling have something in common. Using both vehicles, it is possible to make or lose significant amounts of money. However, there is a massive difference that separates the two: your odds.
When you gamble, the odds are always against you. Ultimately, the house always wins overall, so there’s a strong likelihood that you’ll lose.
With investments, your more likely to “win.” Over the long term, the average annual return on stock market investments is almost always positive. This means, while you could lose it all, you most likely won’t, especially if you diversify your portfolio.
2. There are “Secret” Investing Strategies Worth Paying For
You likely see these all over the web. Sites that promise that their “secrets” will help you become a millionaire. But, there’s always a catch; you have to pay for the information.
While traders and investors may have a few strategies they keep close to the vest, no “secret” is going to make you an overnight success. In fact, the only people who benefit from these arrangements are the people selling them. After all, they got you to part with some of your hard-earned money.
3. You Have to Abandon Stocks as You Age
While it’s true that most people make their portfolio more conservative as they reach retirement, that doesn’t mean you have to fully abandon stocks. In fact, that can be a terrible move if you want a comfortable retirement.
Typically, stocks are more likely to offer inflation-beating returns, so keeping them in your portfolio is a smart plan. However, you might want to adjust your stocks-to-bonds ratio as you age to reduce your overall risk.
4. Investing in a “Hot” Company is Smart
Usually, once a company is said to be “hot” on a major news network, the ideal window for investing is likely over. And, yes, this even applies to many initial public offerings, or IPOs, as you still aren’t getting in on the ground floor.
In many cases, once the hype has begun, the company’s stock price may shoot upward. However, these bursts are usually short. And, once the fervor is gone, the value will shift downward.
Now, this doesn’t mean that the stock is a poor investment, as it could very well be successful over the long-term. However, it may not soar like some would have you believe, and it can even experience a tumble when the excitement is done.
5. It Takes a Lot of Money to Start Investing
Many people subscribe to the notion that only the rich should invest. While it’s true that you may want some financial ducks in a row first, investing is a wise move for almost anyone.
In some cases, you’ll need to save up a small lump sum to open an account with certain brokerages, as they could have minimums. However, there are a lot of options that let you start investing with very little, allowing practically anyone begin investing.
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