The realm of investing can seem awfully daunting, with so many potential investment securities to buy and an equally huge amount of tools and strategies to use. Fortunately, you don’t need a finance or economics degree to be a successful investor. In fact, most consistently profitable investors don’t have any special qualifications. Here are a few other myths you should know about that can negatively affect your investing outcome.
Investing Requires a Great Deal of Capital
Perhaps the most common investing myth is that you need a lot of cash to get started. This deters a lot of ordinary people with 9-5 day jobs and limited cashflow from ever buying their first bond, stock, ETF, or any ot her investment security for that matter. Nowadays, you can start investing with as little as $50. ETFs, or exchange traded funds, are a great starting point for those who are undercapitalized but want to start investing their money.
You Need to Pick Winners Consistently to Make Money
This is a typical mindset for short-term investors or traders. They think the stock market is a game where they need to outsmart other investors, time the market, and pick “winners” in order to consistently profit. While that mindset and approach may work for a while, taking a more diversified approach to investing can yield better long-term results. Rather than try to pick one or two stocks from the thousands available, a mutual fund or ETF gives you exposure to a basket of stocks, which distributes the risk effectively.
You Need to Consume as Much Information as You Can
Another self-harming myth that novice and even experienced investors follow is that you need to consume large amounts of information in order to succeed. As a result, investors drown themselves in a sea of financial news reports, balance sheets and earnings calls, educational YouTube videos and online trading courses, etcetera. They also try to arm themselves with more technical indicators, like RSI and Bollinger Bands, to help them predict future price direction. For long-term investing success, stick with the fundamentals, which includes proper risk management practices, macroeconomic principles, and key value indicators.
Acknowledging these myths about investing lends you a different perspective of the financial markets and how they operate. Before you start investing, make sure you build a financially stable life first by eliminating any debt, having an emergency fund, and maximizing your contributions to your retirement savings account.