The stock market is driven by fear and greed, hence, it is quite obvious that there may be lots of myths surrounding it. 90% of the things that most of the people say about the market is far from a reality and generally stems about because of lack of knowledge. A proper awareness about these stock market myths is imperative to ensure you invest with a free mind and achieve your financial goals hassle-free. Especially, in this world of technology, where most of the information is available at the very tip of the finger, it is important that you must devote some hours towards learning and understanding the basic difference between the reality and myths of the stock market.
Here is a list of some of the popular stock market myths that you must not believe:
Investing in Stocks is Similar to Gambling
This is perhaps one of the most common stock market myths which make people stay away from investing. People have a perception that the stock market investment is purely based on luck, but it is totally a misconception or baseless information and nothing else. It is important to understand that getting a stock means having a part ownership in a company. With the period of time, if a company makes a profit, then its business value will grow and since you own a part of the company in the form of shares, then ultimately your ownership will also increase proportionally.
There is a thin line between investing and gambling that most of the people fail to understand. If you are investing in the stock market with a proper research work, going through the charts and taking advice from the Securities and Exchange Board of India (SEBI) registered advisors (if required), then it is not termed as gambling. However, if you get into the market, without any knowledge or an expert advice, then it simply means you are only trying out your luck, which is very similar to the gambling. Hence, it is imperative that you should not get confused between investing and gambling.
Stock Investing is Only for the Rich People
This is probably one of the prime reasons people shy away from the stock market in India. They have a thinking that it requires lots of money to start investing in the stock market. This is totally a myth and nothing else and this problem usually stems up because of lack of understanding or knowledge among the general public. The stock market is for everyone and not only for the rich people. A big amount is not at all required to start investing. The actual amount required depends mostly on the kind of shares you are interested in buying or have in your investment portfolio.
It is strongly advised to invest only a small amount initially and then increase your investment gradually once you have got the proper understanding of the market. This would minimize the chances of losing your hard-earned money in the market. Furthermore, it is also advised that you should never borrow to invest in stocks as you can get into heavy debts. No one can predict the market movement, so investing with the borrowed money is a strict no-no.
Stock Market Investment is Complicated and Requires Special Training
Not really. Investing in the stock market may sound as challenging and difficult for many people, but it is not complicated. The complicated charts or some jargon terms are enough to scare the people from investing in the stock market. There is a misconception among the general population in India that it requires some kind of special course or training to start stock market investing, but the reality is far from the truth. However, there is some good news for you! You do not require any kind of special training as in this of the internet, getting the stock market tips is only a click away. What you really require is some basic understanding of the market and logical thinking so that you overcome stock market fear and trade in the live market hassle-free.
Investing in Stock Market will make you a Millionaire Overnight
This is one of the biggest myths about the stock market that most of the people have generally. Owning a stock means buying a certain percentage of ownership in the company. If you follow this approach, then you will understand clearly that investing in the stock market does not make you a millionaire overnight. For instance, you cannot even think of starting a business today and selling it for millions tomorrow or after a few weeks. You may give some time to your business to grow and earn profits for you. Similarly, in order to get consistent or better returns from the stock market, you have to be smart and patient. You must give time to your investment portfolio to grow in terms of value. If you want to get rich overnight, then investing in the stock market is not your cup of tea.
Investing in Lower Price Stocks is Profitable
One of the common stock market myths that most of the people tend to believe in is that investing in the lower price stocks like the penny stocks will be profitable for them and add value to their investment portfolio. One should never purchase the shares having a low price because there may be strong fundamental reasons behind the steep decline in the share prices. Irrespective of the prices, there are several other factors that must be taken into the consideration for buying the shares like:
- Growth prospects of a company
- Management of a company
- Market position of a company
- Debt position of a company
- Projected profits of a company
- and many more
In simple words, one should not fall for the shares, which is being offered at low prices. It is important that you must do your homework first and keep a close tab on the outlook of the market before investing your hard-earned money. Try to invest in those companies that may hold on to their growth in the future.
Little Stock Market Knowledge May be Helpful than None
You may have heard of the phrase “Empty Vessels Make the Most Noise” and it is more applicable in the stock market as well. While it cannot be ignored that having some information about the market can turn out to be a great blessing in disguise, but half knowledge can prove to be more disadvantageous than helpful. There are some important stock market concepts or terms that most of the people may not understand in the first place and this can prove to be highly detrimental if you are planning to invest in the stock market. Hence, it is always advisable that you must have a good knowledge of the company or market before investing. If you are pre-occupied with lots of work, then it is quite better to seek the services of a stock market advisor who with his/her expert knowledge will ensure that you put your best foot forward when it comes to investing in the stock market.
Investment is Not Important at an Early Stage
Who says that you need to grow old to invest in the stock market. There is no ideal age to think of investing or trading in the market. Not many people may not know that Warren Buffet, one of the most successful investors of all time and third richest man in the world, started to invest at an age of 11 years. Yes, you read it right, but still, he thought he was too late to start investing. Many people have a thinking that they are too late to invest and they need to free their minds from this stock market myth. You must think to start investing at an early age to get your first income and most importantly take the benefit of the compound interest for the higher returns in the long-term.
The Closing Words
It does not matter what you do, if you do not possess the desired information about the market, then there is every chance that you may make foolish investing mistakes. It is extremely important that you must leave no stone unturned when it comes to educating yourself against some of the basic stock market myths as you can save a significant amount of precious time and money, which may have been otherwise wasted owing to lack of knowledge. Investing in the stock market requires great hard work, logical thinking, and effort. One of the good ways to stay away from these investment myths is to formulate a comprehensive financial plan according to your needs and financial goals.
Do you have any more stock market investing myths that are missing in the list? Do let us know your thoughts in the comment section below.
Note: All information & data provided in this article is for the educational purpose as well as to give general information on the finance & economy, not to provide any professional advice or service. Views & opinions are not biased against the company and do not affect any official policy or any other agency, an organization within the content.