Investing myths can cause a great loss by giving an assumption that a certain investment is either too risky or not risky at all. So, one should be aware of these myths so that he/she can avoid them and be able to avail benefits in one way or another possible.
First Myth is to consider investing similar to gambling. However, apart from the similarity of chances of loss in both the cases, unlike casinos which are always on the safer side, there is an approximate 8% annual return in the case of stocks. Thus, with the passage of time, a diversified portfolio can make a person rich. So, this myth is not even close to reality on the basis of the fact that by holding a share you become the part of that company, not like a rolling dice which is a sheer game of chance.
There is another myth that in order to get success in investment, one needs to have some secret recipe. The ones who believe in it, get trapped at the hands of those people claiming to own that recipe. It is no big secret, merely focusing on index funds and staying at low costs adopting diversification instead of beating the market.
The next myth that exists is that ageing takes away the power to take the risk. Means, the older a person is, the lesser risk he should take. So, instead of being conservative near your retirement, you should become more active. According to an approach known as ‘rising equity glide-path’, a person can collect benefits from various places instead of running out of money in retirement.
Another myth is that one should rapidly buy a stock in a company making hype in the market. However, studies have shown that such hot IPOs (Initial public offerings” underachieved up to 3.3% as compared to all the other firms in the duration of 1970-2011.
The most popular of the myths that keep a person totally abstained from working is that one should have a huge sum of money before he can even think to invest. You can even start an investment through the retirement plans like 401(k), and IRA. However, it is true that one should refrain from investing the money that he is going to need for use in the coming five years.