Investing money into the stock market seems a very profitable option for many. You get to explore the various investment and trading strategies. And, one is bound to get attracted looking at the big names listed at the stock exchange.
For the past few years, investing in stocks has generated better returns than any other asset classes available in the market right now. People invest their hard-earned money into the stock markets with a common belief of getting rich in a bullish market quickly.
To earn quick bucks, we tend to follow recommendations from friends, family members or search for free advice online. As a result of these, the stock market is also full of several myths concerning the process of money-making in stock markets.
So, are you looking to start your investment journey in stocks? It is better to understand and clear the myths related to the stock market beforehand.
Stock Market Myths Busted
Here, you will find the biggest stock market myths and the facts associated with them. Look at a reasonable angle why we need to get over these myths and believe in facts. Let’s get it started.
Myth 1: Stocks Investing is Similar to Gambling
Some people believe that stock market investing is similar to gambling. Since you make money in a stock market based on your luck, that’s not true. Investing in the stock market is not a lottery ticket to be won. It’s not how the stock market operates.
Gambling is spending money without examining anything. However, the stock market requires you to do in-depth research and make informed decisions based on your research. To make money in stocks, you need a proper understanding with an informed approach regarding how the stock market works.
Not to forget that the stocks you are purchasing belong to a company, so the performance of that company, in the long run, will affect your profit as well.
Myth 2: Stock Market Requires a Big Initial Investment
A common myth that we all believe! The study shows that many well-known investors started with very little initial investment.
It does take money to make money, but it doesn’t mean that you should start with a massive sum to invest in the stock market.
Stocks don’t require millions to start your investment journey. All you need is to start with whatever you have right now and have enough patients to generate profit over time.
Myth 3: Stocks are the Way to Get Rich Quickly
This perception is due to some brokers exaggerating about the stock market returns. People, who believe that the stock market is the place to become rich fast, actually don’t have a deep understanding of how the stock market works.
Generating profit from stocks is directly proportional to a company’s growth. No company in the world can grow overnight. It takes decades to grow a company.
If you see any successful investor, then you can see a common thing among them. They waited patiently before making a meaningful return on their investments.
Myth 4: Stocks Growing Up Right Now are the Stocks to Invest in
Few investors don’t understand how the stock market works, so they invest in the stocks going up and performing well. No one wants to lose their money anyway. Right! But when the market crashes, many of these stocks may see losses.
A stock’s performance is proportionate to the company’s business. Good stocks are not those going up right now. Keep looking for the ones having an underlying value.
Successful investors always try to grab good stocks when their prices are low. Buying such stocks during market correction is the most profitable long term investment strategy.
Myth 5: Mutual Funds are Better than Stocks
Investors who don’t understand how the stock market works or can invest their time and track stocks regularly are more interested in mutual funds. Mutual funds get managed by professionals, so you can easily make a profit in the long run. A common myth!
How favorably mutual funds hit the benchmark index? The majority of these mutual funds fail to beat their benchmarks. Only a few of them can attain that consistently. So, mutual funds are better than different types of stock investment, this may not always be true.
These are the biggest stock market myths that we tend to believe one way or the other. Now that you know these, you can better prepare yourself and save a significant amount of time, effort, and money that you would have otherwise consumed. So which new stock market myth you came to know today? How will you tackle it? What are your thoughts on the same?
This is a guest contribution by Harleen Kaur, a Chartered Accountant, a finance enthusiast, and a passionate blogger running a personal finance blog @ Fintrakk.com sharing knowledge and simplifying things in the field of finance and investment for the common man.