We all live by believing in myths. Believe that some of them don’t hurt us too much, like the myth that we all have to drink eight cups of water a day. (There is no one-size-fits-all amount – it depends a lot on your body and activity level.) Believing that other myths can hurt us, and this can be especially true of financial myths.
So here are five investing myths you should ignore in order to build a more secure future for yourself.
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1. Investing is for the rich
If you stay away from the stock market because you think that investing in stocks is only for the rich, you are really missing out on something. Numerous good brokers These days, no trading commission is charged (for buying or selling stocks), and many have a low minimum investment required for opening accounts. Better yet, you can buy as little as one share, if that’s all you can afford. Or, with, say, $ 200, you can buy 20 shares of a $ 10 share or two shares of a $ 100 share. You don’t have to be rich.
2. Investing in stocks is like gambling
Many people think that investing in stocks is like betting – and sometimes is true. If you’re investing in penny stocks, or trading by the day, or borrowed heavily from your brokerage to invest on margin, or chasing top-flight stock with nothing knowing , you are gambling.
But vast fortunes have been gained in non-gambling stocks, and you can pursue that as well. All you need to do is focus on large companies, ideally the healthy and growing ones – buying them at attractive prices and holding them for many years. Think of companies like Amazon.com, Apple, Microsoft, Nike, Starbucks, Pfizer, Costco, Visa, and Mcdonalds. How risky do you think it is to invest in them, thinking that they will get bigger in the years to come? It is not play.
3. A large company means a large stock
The companies above are all great companies, but that doesn’t mean you should buy them at all costs. When investing, for best results, you want to identify the right companies that are negotiating for good prices – or, better yet, the good companies that are negotiating for good or attractive prices.
Here’s a shocking caveat: in 2000, Cisco Systems, the highly respected titan of networks, has hit a record stock price. Then, along with much of the stock market, it sank when the dot-com bubble burst. Today, in 2021, the stock has always not regained the ground he had lost. Anyone who bought Cisco near this hefty price tag is still under water. The company is still around after all these years and made nearly $ 50 billion last year, with a net profit margin of over 20%. His the outlook is solid, but that might mean little to those who bought in 2000.
Image source: Getty Images.
4. There is a good and a bad time to invest
Many people also mistakenly assume that there are good times and bad times for investing in stocks. They may think (or be told by a guru on TV) that since the stock market has gone up for three consecutive years, there must be a correction. They can sell most or all of their shares, waiting for this correction – which may not happen for two years. They may find themselves on the sidelines as the market jumps 20% or more. What they do is called “market timing“, and it’s generally a misguided endeavor. Nobody knows what the market will do in the short term. In the long term, however, it has always gone up.
This myth is actually half true, because in many ways just about any time is a good time to invest in stocks, as long as you are willing to do so – without high interest rate debt. and a basic equity investing base. A good way to approach investing is to average purchase – regularly drop your hard-earned dollars into the market, whether it’s rising or falling. You will get some stocks at higher prices and others at lower prices, but you will continue to accumulate stocks and, in the long run, they will likely continue to rise.
5. Investing takes a long time
Finally, many people may avoid the stock market because they think it will take a long time. It can – if they are active investors, study companies, decide where to invest, and then decide when to sell. But investing in the stock market can take very little time if you go about it the easiest way – by investing in one or more markets. index funds.
An index fund will quickly spread your money among the many companies in the index, and you’ll get the same return as the index (less fees – and there are a lot of good ones, low-cost index funds). Chances are your 401 (k) plan offers one or more index funds, and you can also invest in them through brokerage firms, in a regular taxable account – and / or in your IRA. Even Warren Buffett has recommended index funds for most of us.
So don’t let any stock market myths distract you. Most of us need to save and invest aggressively, to build a nest egg for retirement – and it’s hard to beat the stock market to build long-term wealth.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the board of directors of The Motley Fool. Teresa Kersten, an employee of LinkedIn, a subsidiary of Microsoft, is a member of the board of directors of The Motley Fool. Selena maranjian owns shares of Amazon, Apple, Costco Wholesale, Microsoft and Starbucks. The Motley Fool owns stock and recommends Amazon, Apple, Costco Wholesale, Microsoft, Nike, Starbucks, and Visa. The Motley Fool recommends the following options: January 2022 long calls at $ 1,920 on Amazon, long calls at $ 120 in March 2023 on Apple, short calls at $ 1,940 in January 2022 on Amazon, short calls at $ 120 in July 2021 on Starbucks and $ 130 short calls in March 2023 on Apple. The Motley Fool has a disclosure policy.
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