when it comes to investing many people are worried and hesitant to get started
some think they can't do it at all investing seems to be very daunting and you constantly have doubts
you're always wondering how you can do it the right way always second guessing yourself
the reason for this is most likely the number of myths
surrounding investing these myths usually start out when someone makes an accurate observation
however it may only apply within a specific time period or a certain context or market
whether these myths have merit or not has little to do with how widely they may be believed
here are some of the common misconceptions that may change your outlook on investing 1. investment
decisions should be made based on recent returns just because a fund or stock did well in the past
it doesn't necessarily mean it will do well in the future when it comes to investing you're never
sure of anything successful investing is about having a fluid approach to market volatility and
being aware of the risks involved if real estate is trading for example you'll be more inclined
to invest in it but before you do so you have to understand that every asset performs differently
following a particular cycle what works today may not work months or years to come a stock's
current performance shouldn't be the only reason to invest in it two you have to wait until you're
older to invest you could choose to wait but there really isn't a right age is there a lot
of people tend to push things or postpone them till later on rather than utilize the time they
have now you'll tell yourself i still have plenty of time to invest in the future but no one's sure
of what lies ahead things happen and between now and the time you're planning to retire so
many things can happen that will ruin your plans the cost of living could change at any moment
life expectancy is unpredictable and you may fall ill or even lose your life having all these
factors in mind it would be the right move to start investing as young as possible to guarantee
a better future investing sooner allows you to take advantage of reinvesting and compounding
no matter how small you put in by investing your money the returns you make will go a long way
encountering the effects of inflation meaning your money retains its value by the time you retire
three you need a hefty amount of money to invest when people think about investors the image that
pops into their head is that of high-powered wall street types with millions of dollars at their
disposal but truthfully anyone can invest warren buffett one of the most successful entrepreneurs
is believed to have started his investment career with a stock that costs 38 dollars per share
a number of investment firms have small minimum requirements and some none at all recently brokers
have developed apps and programs that allow you to invest starting with very little even
pocket change can be used to start with this misconception has deterred people
from investing but in essence you don't really need a lot consider investing small amounts of
money regularly this will reduce the risk from market conditions over a certain period of time
you could try buying fractional shares of a company or you could try an index fund starting
small also means you can start early because the older you get the more financial commitments
you'll have making it hard to set money aside to invest four avoid risk and volatility at all costs
there are always risks in investing you can't run from them they're inevitable selling your stocks
every time you think the market is going down as a way of trying to avoid risks will do you no good
in fact this will only harm your returns in the long run attempting to time the market is very
hard and it's likely you'll always sell too soon and this will just delay your returns the best
way to go about this would be to diversify as this minimizes loss by spreading the risk
diversification gives you the chance to own risky assets which have the potential of producing great
returns without risking the portfolio as a whole most experts consider a portfolio more heavily
weighted towards stocks riskier than a portfolio that favors bonds but risks should be embraced
and managed at the same time as an investor you need to find your comfort level and build your
portfolios and expectations accordingly and as the common saying goes no risk no reward
5. gold is the safest bet the thought of investing in gold is very enticing gold is viewed as the
best way to go as far as safe investments are concerned the gold investment theory is based on
the idea that fiat currencies will lose value as a result of the printing of money although there's
some truth to this the theory is flawed most people invest their long-term savings in stocks
and assets rather than fiat currencies investing in gold with the idea never loses value is the
wrong approach gold is subject to supply and demand pressures like any investment or financial
asset that cause the price to fluctuate of course gold stabilizes your stock market portfolio when
it's added to it and even though you don't lose money you don't make any notable returns either
the reason is gold doesn't pay interest or dividends and its intrusive value doesn't increase
all in all gold should be perceived as a barrier against volatility inflation
but not as a way to generate wealth 6. investing and gambling are the same thing people assume
this probably is a way to simplify their view on investing to some investing is just a way to make
quick cash but for all those who've done it before strategic investing is hardly considered a gamble
when you buy a stock you expect it to increase in value but this isn't always the case and its value
decreases but even if this happens the asset has the potential to rise again in the future
one of the major differences between investing and gambling is that you're buying a certain
percentage of ownership in the business when you buy a share of a company stock when you look at
gambling you'll note that there is nothing of value you're getting in return when you exchange
money for chips in the casino and place your bet if you have a winning bet you're given more money
back but if you lose your money is lost completely and there's no way you'll gain from the money you
gave out at the beginning 7. a 401k and social security are the only ways to save for retirement
employer-based retirement plans like the 401ks are very popular but it's not the only way
to save for retirement iras are one of them iras may have a lower limit on contributions
as compared to 401ks but with these you're able to invest up to six thousand dollars as of 2020
or even seven thousand dollars if you're 50 or older according to the irs
no one knows the future of social security and many investors know firsthand
that employer-sponsored retirement plans don't always work out starting young and diversifying
through a variety of investment vehicles is the best way to secure one's financial future
eight the stock market is the best place to invest if you want to grow wealth invest in what you know
this is one of peter lynch's famous quotes what this means is that you should invest in areas
you're familiar with invest in things that give you the upper hand over other investors
many investors don't take this advice and invest in areas they don't understand well they place
their money in stocks that are always going up but they don't know the reason behind it the number of
investments that can be made are unlimited bonds commodities real estate and currencies are some of
the other options you have a portfolio focusing heavily on stocks might be appropriate for most
investors but if it's not something you are too interested in focus on something else
there's nothing wrong with investing in stocks but it's wise to invest in your strengths
not your weaknesses you could always be creative and come up with something that gives you an edge
over others it's advisable to allocate at least 20 of your portfolio in other asset classes
for diversity nine international investing is too risky if you look at current markets you might
find that the u.s investments are doing better than international ones but before you write off
international investments completely you should also look back between the years 2000 and 2009
you will discover that a diversified portfolio of international investments significantly
outperformed us's larger cap investments foreign or international markets can offer
significantly less competition and sometimes a marketplace with greater investment opportunities
although this depends on the country or market you invest in investing overseas provides investors
with a dramatic increase for investment and the potential for significant returns sticking with
this phrase therefore could keep you from some potentially diversified international investments
that could work out really well for you 10. the professionals always beat the market
it's true that some professionals are able to beat the market sometimes but studies
show the chances of an investment professional outperforming the market is very slim you might
do better with a low-cost fund but if you think about it do you really need to beat the market
the main idea behind investing is to meet the long-term financial goals you've set for yourself
and not compete with the market yes professionals can assist you in achieving your financial goals
and offer insightful advice and manage your money for you but they won't always beat the market
and you shouldn't expect this of them a majority of the active portfolio don't usually do as well
as the passive portfolio and the reason behind this is that a broker probably mismanaged your
portfolio most of them do what's best for them and fat in their own wallets they tend to over
trade sometimes and raise commissions that won't be in line with the goals you've set for yourself
your best option would be to employ the expertise of a financial advisor you'll pay
them their dues and you'll be certain that your investment decisions won't be taken advantage of
this will also assure an increased net worth since you'll be dealing with professionals
these are just a few of the misconceptions that have spread widely in the investing world
but be sure that there's nothing definite or absolute when it comes to investing
knowing how to make the right decisions from calculated risks is really crucial investing
is versatile and can't be reduced simply to a few sets of rules i hope you guys enjoyed and
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with all that said have a great day you guys and i'll see you all in the next one