There are a lot of myths when it comes to investing that you’ll need to overcome so that you can succeed. To help you, here are some of the myths and facts surrounding investing that you need to know.
Myths:
#1 Studying the Market as a Whole Improves Outcomes
Instead of worrying about the market as a whole it’s more important to understand your own personality and what you can handle in terms of risk, and to study the individual company that you want to invest in. That information is far more important than the overall market.
#2 Stay Out of International Investments
The worst thing you can do is avoid international markets. We live in a global society and often when one country is down another is up. Plus, there are many emerging markets in other countries that are great investments that you will regret missing out on trying to stay domestic. Never overlook opportunity by buying into the myth that your country is the best at everything.
#3 The Past Predicts the Future
This is true in some sense, in that the past has shown that over a period of time of at least 20 years you can typically expect an 11 percent return on investment. However, this is a bad way to determine whether you should buy any one particular fund. Just because a fund did great last quarter doesn’t mean it will do well next quarter. Study that particular industry to figure out as best as you can where it is going. It could be at the bottom ready for more or it could already be at the top.
#4 Difficult Strategies Are Always Best
Sometimes a difficult strategy will pay off, but it’s not always best of course. Many times, and the truth is more often than not, simple is best when it comes to investing. If something is super-complicated it might even be a terrible idea and end up costing you a lot more than something that’s easier.
Facts:
#1 You Will Never Beat the Market
The idea that anyone can beat market is crazy. This is a true fact: you will never beat the market. So much goes into every single day of the overall market, and into each business or commodity you’ve invested in, that it would be impossible to “beat” the market. Do your due diligence on each investment you plan to make and rely on that, instead of trying to be better than everyone else or thinking you’re smarter than others before you.
#2 You Have to Spend Money to Make Money
One of the biggest killers of dreams is thinking you can get something for nothing. The truth is, the more money you invest and the more money you spend on investing, the more return you’ll likely see. That’s why higher risk gets a higher reward whereas lower risk equals a lower reward.
#3 The Best Way to Succeed Is to Take Risks
That brings us to the fact that taking risks will make you more money when it comes to investing. But, don’t take risk without research and understanding what you’re doing. Stocks are always going to be risky, but the reward will more than likely outweigh the risks.
#4 Starting Sooner Is Always Better
Due to the facts of compounding interest and the value of time, the sooner you start the more risk you can take and the more reward you’ll get. The fact is, if you started investing just 100 dollars a month at age 22 for 43 years, assuming an average rate of interest to be 10 percent a year, you’ll have $716,904.84 at age 65. If you started just ten years later you’d only have $269,024.37 at age 65. What a difference ten years makes.
Accepting these myths and facts will be the first step in getting started investing on the right foot.