5 financial myths that just aren't true
Myth 1: "Homes Are Great Investments"
Buying a house is usually one of the main goals of my younger clientele. It's the American Dream. It's knowing that you can provide your new family a roof over their head. It's not always a good investment.
If you're young and are burdened by debt, renting is probably the better bet for you. There's nothing wrong with renting either! Buying a house means putting a LOT of cash down and taking on a mortgage. Mortgages aren't exactly flexible. Then you've got to worry about monthly maintenance, taxes, insurance, etc. Owning a house is expensive, illiquid, and not something you should consider until you are REALLY REALLY REALLY ready.
Not to mention, home prices (according to several studies) appreciate at a rate at or below inflation. In comparison, the S&P 500 historically has returned around 7% (adjusted for inflation) since it's inception in 1928. If you want to put roots down that's fine, I would just urge you not to view your primary home as an investment.
Myth 2: "Investing is Only for the Wealthy"
Wrong. Wrong. Wrong. This one just downright annoys me. Maybe you were conditioned to believe this? I'm here to tell you it is a MYTH! Investing is not as complicated as you might think. Sure, there's a learning curve, but with a little help and research you can begin. Maybe you've already begun? Do you have a retirement plan (401k or IRA?), then congratulations, you're already an investor. And guess what?! You don't need $100,000 to start.
Yes, there are stocks that cost thousands per share, and there are mutual funds with high minimums, but there are lots of affordable options as well. ETFs and Index funds might be a great place for you to start. Many have little or no minimum investments and low fees. Contribute a little bit each month to your retirement plan and IRAs and as time progresses, you'll watch those small amounts grow exponentially.
Investing over the long-term is how you BUILD wealth. Wealth doesn't happen over night unless you are building iPhone apps. Duh.
Myth 3: "A Will Guarantees Your Assets Will Be Distributed How You Want"
This is a myth my friends. In fact, if the beneficiaries named in your retirement plans (401k, IRA, Roth IRA, etc.) are different than those you've named in your will...the assets go to the beneficiaries on the retirement accounts and NOT those named in your will. Make sure your will and the beneficiaries you've named on the accounts are in agreement.
Myth 4: "I Don't Want to Invest Now...I'm Trying to Time the Market"
"Timing the market" means you think you can figure out the best times to buy low and sell high. Well here's a quote from famed investor Peter Lynch, "I can't recall ever once having seen the name of a market timer on Forbes' annual list of the richest people in the world. If it were truly possible to predict corrections, you'd think somebody would've made billions by doing it." That's all you need to know. It's just not possible. It's best to get in as soon as possible and have a solid, long-term, passive plan, with proper diversification.
Myth 5: "I'm Too Young to Worry About Retirement"
Nonsense!!! Time is the best tool you have to build wealth. The longer you wait, the less money you're going to have at retirement. Even if you think it's a long way off and you don't have the money to start now, begin anyway. Do what you can. It will make a HUGE difference in the end. Time coupled with compound interest is pure magic my friends. (Click on the words "compound interest" to see Investopedia's explanation). It's truly the eighth wonder of the world.
The post Mythbusters: Financial Tales That Just Aren't True appeared first on The Funny Financial Planner.
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