Myths are common beliefs that are far from reality. Like any other field, many misconceptions surround the stock market that needs to be debunked. These myths may lead a new investor to act in ways that may prove detrimental to his finances.
Below are the five most common myths you need to drive out before investing in stocks or shares of any company. Let’s get started!
Stock Market Is For Rich And Big Businessmen Only
One prevailing thought of people is that the stock market is only for the rich, and you need to have a lot of money to get started with investing in shares. But there is a different story.
You can start with as little as $1 and start buying the stock portfolio with just $1,000. No doubt, you need to avoid stocks at higher prices until you have sufficient money. It shouldn’t stop you from investing in stocks now.
Another myth is that the stock market is for stockbrokers and institutional investors because they have the privilege to gather well-researched information and can predict the returns. However, stock market predictions aren’t always accurate.
Unlike institutional investors, individuals aren’t under pressure to make profits every quarter. They can think long-term and are in a better position to provide more stability to the investment.
Investing In Big Companies Is A Safe Bet
No one can predict the future of a company by looking at its name and fame. Falling for a company due to its big name and assuming that your money will be safe there is a big mistake you should avoid!
If you consider the Sensex a couple of years back, you will find that stocks like Infosys, TCS were unprecedented. Infosys gave considerable profits for over a decade but has struggled in the last few years. And, Amazon became a $1 trillion company during that period. Look at theif you want to make an investment there.
Just because a company is famous and has been there for a while doesn’t make it a good investment. Gather knowledge about the stock market predictions, make an educated decision, and don’t trust your gut feeling blindly.
A Small Mutual Fund Fee Can’t Hurt Your Profit
Many stock market investors think that the fees charged by a well-managed mutual fund are small enough to affect their profits. But, this myth is far from true! The mutual fund fees of 1-3% will decrease the amount you have invested and affected your finances in the long run.
Whether the fund makes or loses money, they charge you a certain fee every year. However, if you invest in a fund that beats the market with a profitable margin even after considering the fees, it might be a good investment.
Less Risk = Less Returns; More Risk = More Returns
It isn’t a hard-and-fast rule in the money market. Suppose you buy low-quality stocks hoping that they may not lead you to any profitable returns and incurred a high risk. But, in reality, you may be on your way to losing all the money you invested in the stocks. Investing in the share market is all about deciding how much money to invest in a particular stock while calculating the risk factor.
A Little Knowledge About the Stock Market Is Better Than None
In the money market, while it is true that having some knowledge is better than nothing, but half knowledge may prove disastrous. It can harm you more than help. Therefore, it is advised to gain thorough knowledge before you enter this volatile market.
To Sum Up
It is always better to be safe than sorry. If you make investments based on half-knowledge, you could incur a big loss. So, keep away from these myths by creating a financial plan that addresses your financial goals.