Stock markets are known as the club of wealth for a very long time. If you want to join this club too, you must be really excited. The best part is online trading has now open new horizons and so you can trade whatever way you want. But as you are understanding how to invest in the share market, you will pass through the wave of popular myths. Don’t believe them because they are mostly backed with an incorrect understanding of the market.
These are the 10 myths you must dispel before investing in share market…
1: More Risk Means More Returns
No, high risk doesn’t always mean higher return. It may be true in some scenarios but not all of them. For example, if you are taking the risk by buying low-quality penny stocks, you are definitely not going to get a higher return on it. Taking irrational risks will make you lose your capital.
2: You Need a Huge Initial Investment to Start
It takes money to make money but that doesn’t mean you will need a lot of money. Just take a moment and study the life of the most successful investors. History tells that they started with very limited capital. When Warren Buffett started investing, he used to deliver newspapers. He didn’t have enough money to invest but eventually, he had his humble beginnings.
Don’t believe anyone who says you will need millions to invest. Start with whatever you have and give it time to grow.
3: Share Market Can Make You Rich
In general, people have this perception that the share market is the best place to start if you want to get rich. That is not how the market works.
Yes, there are stocks that tend to perform really well and they tend to bring great returns. But this calls for being patient and willing to stay invested. The successful billionaire investors patiently waited for decades to watch their investments grow. Share market is definitely not a place to get rich overnight.
4: Mutual Funds Are the Safest Investment
Investors who don’t have time to track the stock market prefer investing in mutual funds. They think it’s a safer form of investment. Why? Because professional fund managers who have years of experience in the field manage them.
It’s risky to depend on mutual funds to outperform the market and get rich. If you happen to choose the wrong funds, you will end up losing a lot of money.
5: Market Is Very High, I Will Wait for the Right Time to Invest
When the market inches towards a higher level, most people like to wait. They believe once everything settles, they will make money selling stocks which they bought at a lower price. The idea of selling stocks when their price gets high sounds delicious but the reality may turn out of different. No one can predict the share markets. So, it’s best to make small investments but consider the long-term perspective.
6: Pay a Professional and Don’t Make Your Own Decision
Newbies are tempted to hire professional managers believing they can make better investment decisions than them.
The reality is different. These professionals often fail to beat the benchmark. But you are still supposed to pay them a huge fee. The problem with hiring these professionals is that they have their own interest in mind. Who do you think would care about your money, you or someone else?
It’s highly recommended to ditch these professionals and do your own research. Understand the market and its trends. Gather enough knowledge to make your own decision.
7: Buy Low and Sell High
Investing in the share market is not that simple. Buying low and selling high is not how things work either. It takes successful investors years to understand the market. And the market is so much more than just highs and lows. No doubt you can find stocks at a low price but there is never a guarantee that you will find an exit point. No wonder so many people end up losing their investment.
8: Popular Companies Make for Great Stocks
Not always! Just because you bought stocks of a popular company, it does not mean success is guaranteed. In fact, there are so many popular companies with bad stocks. They are enjoying a temporary price hike because of hype. Consider the example of General Electric. There was a time it was one of the most popular stocks in the market. Within 2 years, the company lost 66 percent of its share value.
It’s definitely a great idea to invest in popular companies but before you do that, check its growth potential. Ask yourself, is it going to be a safe investment option? Then go from there.
9: Share Market Is All About Luck
If you ever believe this myth, you are never going to be a successful trader. The market does not revolve around luck, it revolves around active research and decision making.
Those who end up buying bad stocks with the belief that their luck will turn things around are definitely in a loss.
10: A Little Understanding Is All You Need
You will find lots of investors in the share markets with little understanding of the market itself but they act like experts. Unless you have comprehensive knowledge of the stock market, you cannot even operate let alone take home profits.
Long story short, if you don’t have enough knowledge of a subject, you are bound to make mistakes. Same goes with share markets. So, educate yourself by starting with debunking with the common myths.