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Dec 09

5 Biggest Stock Market Myths

Reading Time: 3 mins

The stock market is an excellent place to invest in your future. If done correctly, it can bring a decent return and help you avoid losing money to inflation in the long term. The best part about the stock market is that it is accessible to anyone with an online bank account and internet connection. However, the influx of uneducated amateur investors has led to the formation of many myths and misconceptions related to the stock market. If you don’t want to lose your money, you need to know about these myths and understand what is true and what is not.

 

1. You need to invest big

“100 000 is the minimum amount to invest if you want to get a decent return”. Sound familiar? Many people tend to think that if they want to invest in the stock market, they need to either go big or go home. But that’s certainly not true! If you don’t have that much money to spare, you can definitely invest 50 dollars a month in stocks and keep adding more money as you move forward. Plus, if you’re a beginner investor, it’s best to start small so that you can practice and avoid losing money because of a lack of experience.

 

2. Investing is like gambling

Investing in stocks is nothing like gambling. Well, it can be if you invest in random stocks that you know nothing about or if you put all of your money in the same exact stock. If you do this, your chances are just about as good as they are during a match of poker. But if you play smart, conduct proper investment research before putting your money in, and choose a mixture of the most promising stocks, return on investment is almost guaranteed.

 

3. High price = high value

A great example of why this is a myth is Tesla. The only reason why the price of Tesla continues to go up is that there are plenty of inexperienced investors who think that it’s a good stock and keep buying it, bringing its value up further. However, if you conducted an in-depth analysis on a stock like Tesla, you’d discover that it’s far from worth the high price tag. Keep in mind that overpriced stocks are bound to come down at some point, so stay away from these.

 

4. A professional broker is a must

You certainly don’t need to hire a professional broker to put your money in the stock market for you. If you don’t have enough time to perform a stock market analysis and you have lots of money to spare, a broker might be a good choice. But it’s certainly not a necessity. A broker takes a fee from any earnings you make, so your own earnings may be very minimal. If you take your time to learn about the stock market, you can build a great investment strategy without any middlemen.

 

5. Day trading is the most lucrative strategy

If you’ve ever watched a video where a day trader buys and sells a stock within half a minute and ends up earning thousands of dollars, you may have fallen for this common stock market myth.

Yes, the volatility of a stock’s prices does make it possible to earn thousands of dollars within seconds. It also makes it possible to lose thousands of dollars within seconds. No matter what the books and videos say, the stock market isn’t that predictable. It keeps going up and down in response to various uncontrollable factors, and the only period that can be predicted is the long term. So please don’t waste your time and money on day trading and go for long-term investments.

 

Bottom line

The stock market will always have a bunch of myths and lies tied to it. As an investor, it’s your job to recognize these myths and act accordingly. Always remember that the stock market is a very complex place, and if you want to earn a decent profit, you shouldn’t just go with the flow and do everything that others are doing. Before investing your first dollars, do as much research as possible and make smart decisions that will pay off in the future.

 

Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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