9 Common Stock Market Myths Debunked
All kinds of biased opinions and myths are floating around on the internet (and through the grapevine) about investing in the stock market. But there’s also a lot of truth out there.
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The best way to debunk the myths and find out the truth is to ask someone who has experience and knowledge when it comes to the stock market. Keep reading to find out what a chartered financial analyst and certified financial planner had to tell us.
Myth: Investing in the Stock Market Is Way Too Risky
If you’ve ever heard someone say that investing exposes you to too much risk or you happen to hold that belief, you’d be wrong.
Marcel Miu, CFA, CFP(r), founder and lead wealth planner at Simplify Wealth Planning, said that while all investments carry some risk, the long-term odds are pretty good with stocks.
“The stock market has historically provided substantial positive returns over the long term — ~10%+ per year for the S&P 500,” he explained. “Nothing is guaranteed, but a diversified and well-thought-out investment strategy can significantly reduce your risk.”
Myth: Investing Is Hard and Takes Too Much Time
More often than not, if something is worth doing, it takes time and effort. However, investing doesn’t have to be so complicated and time-consuming that it overwhelms you.
“With advancements in technology, investing in the stock market is more accessible than ever,” said Miu. “Simplified trading platforms enable both beginners and experienced investors to manage their portfolios efficiently, often in a set-and-forget mode.”
Check Out: 10 Valuable Stocks That Could Be the Next Apple or Amazon
Myth: It Costs Too Much To Start Investing
Once upon a time, you may have been able to use the expense of investing as an excuse not to invest. However, Miu said this is no longer true.
“Many brokerage firms offer no minimum deposit accounts, fractional shares and free trades, making it possible to start investing with just a few dollars,” he explained.
Myth: It’s Important To Wait Until the Right Time To Invest in the Stock Market
You might think you’ll know when the “right time” is to start investing, but the truth is — if not now, when? The sooner you get started, the better chance you have for long-term gains.
“Timing the market is notoriously difficult, even for professionals,” explained Miu. “The best approach is consistent long-term investing. Starting early and investing regularly capitalizes on the power of compounding.”
Myth: Investment Advisors Are Only Looking Out for Themselves
Registered investment advisors are fiduciaries, which means that they are fundamentally obligated to act and provide advice that is in the best interest of their clients. In other words, only looking out for themselves is not an option.
“Selecting a reputable advisor can provide significant value in navigating financial decisions,” Miu said. To see whether someone is a registered investment advisor and learn about their background, you can enter their name on the Investment Adviser Public Disclosure website.
Myth: Intuition Works Better Than Strategy When It Comes to Investing
According to Miu, being successful at investing is generally based on thorough research and a solid strategy rather than gut feelings.
“A disciplined approach to investing — following a well-researched plan — typically yields better long-term results,” he said.
Myth: More Risk Always Means More Reward
Not exactly.
“While higher-risk investments offer the potential for higher returns, they also come with a greater chance of loss,” Miu explained. “Smart investing is about finding the right balance between risk and return, aligning with your financial goals and risk tolerance.”
Myth: Stocks That Go Up Must Come Down
Miu pointed out that the stock market isn’t a pendulum.
“While stocks can be volatile, they don’t necessarily have to drop just because they have risen,” he said. “Price movements are based on fundamentals, investor sentiment and external economic factors.”
Myth: You Can’t Make Money in a Down Market
“Bear markets and downturns can be opportunities,” Miu explained. “Buying defensive stocks or focusing on industries that thrive during economic downturns (like utilities) can be profitable strategies.”
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This article originally appeared on GOBankingRates.com: 9 Common Stock Market Myths Debunked
