Debunking Myths: Stocks Edition | Milou Blog
It’s been well over 400 years since the first stocks were traded in Amsterdam. Between that and the formation of highly developed stock markets across nations, to robo-advisors making suboptimal investment decisions for us, so much has changed. Yet, there are some misconceptions that you come across as a novice investor despite this evolution. Let’s debunk the most common myths one-by-one.
“The biggest risk of all is not taking one.” — Mellody Hobson
1A common argument amongst many inexperienced youth and rookie investors is — “you need a lot of money to begin with.” So the next time you hear someone say that, shut them down with a big NO. It may have been true in the past, but not anymore. Companies are opening up their investment options to be available for everyone. Around 33% of US-based Gen I (Generation Investor) individuals had less than $500 as account balances in 2020. With that said, it doesn’t mean you begin without a backup plan. It’s advisable to create an emergency fund for yourself in case of sudden unemployment. You could even set aside up to 6 months of your salary for this cause.
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby M.C. Davis
2Short-term wins vs. Long-term gains — another familiar argument. Since you are in the nascent stages of your investing journey, it’s good to shift your mindset (if you haven’t already) to pick long-term gains over short-term wins. Investments held for longer periods tend to exhibit lower volatility than those held for shorter periods.
“Wise spending is a part of wise investing. And, it’s never too late” — Rhonda Katz
3Perhaps, one of the biggest misconceptions on stock investments is when the — “I think you are too old now, you should have started in your 20s because Warren Buffett said so ‘’ argument is tossed around. Experts do motivate people to start young, however, there is no better time to begin investing than NOW. The stock market provides plenty of opportunities to help you save for your retirement
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
4Something newcomers to stock markets inherently believe in is that past performance is a key indicator in assessing the success of a stock. Is it? Not entirely. There is more that needs to be done — researching the firm and the industry, analysing more than just one metric, assessing portfolio fit and more.
Don’t let myths or misconceptions discourage you from taking advantage of all that stocks have to offer. Happy investing!
On a side note, wouldn’t it be great if you were somehow enabled to make well-informed investment decisions? A tool that helps you take charge of your financial future perhaps? Build your portfolio from the ground up with the help of concise educational content — powered by Milou.
