Before we begin our investing journey, it is essential for us to separate the facts from the myths so that we can make the best decisions for our portfolio.
In this article, we will bust some myths that you might have heard about the stock market, and we will explain why they’re not true.
Common Myths About Investing in Stocks
A stock market is a place for certified professionals only
For those of us who haven’t started investing in stocks, it may feel like there is a barrier between us and the stock market simply because we’re not “professionals”.
This is a myth that has discouraged many of us from taking the first step in investing.
If you feel that you don’t know much about investing, there are numerous stock market courses available online to help you get started. What’s more, many Robo-advisory services can assist you in choosing the best investments as per your risk appetite and funds.
The stock market is a gamble
To bust this myth, let’s discuss the differences between investing and gambling.
When you invest in a company, you take up its ownership. As the company grows, so will your investment. Therefore, when you invest, you add value to yourself, the company and the economy on a whole.
On the other hand, a gamble is short-term, and it adds no value whatsoever. Therefore, investing is not a gamble in any way.
Stock market requires a lot of money for an initial investment
If you feel that you don’t have “enough money” to begin your investing journey, you’re not the only one. Fortunately, with the up-and-coming investment products of today, one does not need a huge amount to start investing at all.
For example, have you heard of Systematic Investment Plans or SIP, for short? These plans require a minimum investment of Rs. 500 regularly! This proves that you can start small in the stock market.
I have to pick the “right” stocks to succeed
There are a lot of “market gurus” who claim to have immense knowledge about the best stocks in the market.
What’s important for us to remember here is that there is no “right” stock. Each portfolio is different, and there are no perfect stocks to fit your profile.
There are only combinations of investment products that can give you good returns, and it is your responsibility, as an informed investor, to invest in them.
Stocks can help me make quick money
If you’re looking to make quick profits, the stock markets are not for you. Investment is a long-term process of wealth creation, not instant profits.
It is important to remember that stocks rise because of the growth of the companies behind them. Since growth is usually a long-term prospect, investing in stocks requires patience and dedication.
A lot of people around me are investing in company X. I should invest in it too
Following someone else’s actions in the stock market is the same as making an uninformed decision, and this can lead to losses as well.
Whenever we are investing in stocks, we should make sure that our decision is based on the research that we have done on our own. “Following the herd” can backfire on our portfolio.
We should also ensure that these investments fit our risk profile and our budgets as well.
For reference: https://www.investopedia.com/investing/can-you-make-money-stocks/
Even though this stock is at its yearly low, I shouldn’t worry because it will eventually rise
Holding on to an investment in the hopes of it making a positive comeback is known as the “sunk cost fallacy”. This can cause irreversible losses to us.
Knowing when to exit a stock is essential if we want to save our investments from losses. If you see a stock reaching new lows, it is time for you to re-evaluate your investment, and make a quick but informed decision to exit the stock.
With knowledge, patience and a presence of mind, we can build great investments. We hope that after reading this article, you feel more confident about taking your first step in the stock market.