There are plenty of misconceptions about investing out there that you need to understand to make money. Here are 5 important investment myths you need to avoid.
5 Important Investment Myths You Need to Avoid
You’ve probably heard of stories about people close to you who lost a fortune in the stock market. It sent chills down your spine and made you think twice about ever investing in anything. However, some of the information making the rounds is false.
I’ve been investing in the stock market and real estate to continually build wealth. I even wrote a book about it called Dividend Investing Your Way to Financial Freedom.
You can download a sample of the book if you are interested in learning more.
Avoiding these misconceptions associated with investing is very important. We will explain these myths and why they are debunked. If you want to invest money and build wealth, you simply need to create your own plan and stick to it.
Why investing your money is important
Investing your money is incredibly important. Through investing, you grow your income and assets over time without putting in additional work.
The decisions you make today about investing your money are much more important than 20 years from now. You need to position yourself for success today. Not tomorrow. Investing in stocks, bonds, real estate and alternative assets classes will help you get there. You need to do this through a diversified and disciplined approach.
I’ve been using a blend of dividend stocks and other assets to build my wealth over time. My dividend investing book highlights why I think dividend stocks are a great way to increase your income AND build wealth.
List of 5 Investment Myths You Must Avoid
In fact, students are learning them in schools today. Such misleading information can cause significant losses in investments while leaving you in an ocean of debt.
It ends here! Take a look at some of the myths you need to avoid while investing.
Invest When You Have a Lot of Money
This is by far the biggest myth peddled. It’s more like procrastinating a certain task. With money, you can never get enough. Therefore, there’s nothing like “when I have enough money.”
For others, it’s the fear of the unknown that pushes them to procrastinate investing. If you need to start investing money, use our guide on how to invest money.
Debunked: The biggest mistake many people make is trying to accumulate a huge amount of money in order to start investing. This is the wrong move. Instead, invest and save a small amount from your income. Your investments might not bring in huge returns, but this method will help to cultivate excellent money habits.
Saving and investing in small portions of your income is a good strategy if you’re preparing for retirement. Furthermore, you can increase your earnings over time by reinvesting your earnings.
If you’re looking to invest, don’t wait until you’ve got a house full of cash. Rather, use the little amount you have. Did you know you can start investing in stocks with as little as $100?
You can even use apps like Acorns (get $5 free just for joining!) to guide you through investments from the comfort of your couch.
Properties Are a Sure Bet
Real estate attracts numerous investments, but many seem to think all is rosy in this industry. The previous success of various real estate investors has fueled biased thinking among new investors., one where these investors believe they are in for the biggest success of their lives.
Debunked: While many investors have made a killing in the real estate industry, there’re those who suffer major losses. Real estate is no different from other investments such as bonds and stocks.
Your part in the capital stack plays an important role on how much risk you are taking. This means you have to take time to do some research in order to know the best time to buy a certain asset.
Get a real estate investment adviser who will help you to make informed investment decisions. This will go a long way in averting losses. If you are investing in real estate for income, these are the top 13 real estate risks to understand before you get started investing.
Stick to What You Know
If you’re new to investing, it’s good to stay in your lane. You don’t want to invest in unfamiliar territories.
Debunked: Investing in a familiar field is a smart move, but again, putting all your eggs in one basket is risky. If a storm hits your industry, your money will be at stake. However, you can diversify your portfolio by investing in new sectors, but don’t fly blind.
If you intend on investing in areas beyond your knowledge comfort zone, seek the services of an investment adviser. He or she will give offer expert advice while also recommending which type of investments will be good for you.
Personal advisers can be expensive, but you can seek online advice, which is far less expensive. Some of the best-known companies include Aspiration and WiseBanyan. My favorite is Personal Capital, I get a free investment consultation and I track my cash flow and net worth using their app.
Before choosing an investment firm, though, it’s important to do your research by comparing them online.
John D Rockefeller knew a thing or two about investing
Diversifying Won’t Work with a Small Investment Portfolio
With fewer funds, you might be tempted to pump the brakes on portfolio diversification, at least until when you have “enough” funds.
Debunked: Again, it’s risky to test the depth of water by dipping both feet. For this reason, it’s smart to diversify your portfolio. You might not have the money for large investments, but make sure you invest in ETFs.
ETF stands for Exchange-Traded Fund, which means it is comprised of a number of investments wrapped in a single fund.
Buying an ETF allows you to diversify your portfolio even if you’ll have small shares in each. However, you need to keep an eye on the transaction costs. You don’t want these costs to take a huge percentage of your sales.
Buying ETFs is a straightforward process. You can start with Acorns (get $5 free just for joining!). This app allows you to invest in ETFs with your change. You’ll need to link the app to your bank account and thereafter, it’ll track every single coin you spend. In fact, there are apps out there that will give you free stocks just for signing up. Use these as a method to start building wealth right now.
You can invest using a number of methods, such as an automated schedule which will invest at a selected time on a regular schedule. Or, use a robo-advisor such as M1 Finance or Wealthsimple. These sites will automatically invest your money. Allowing you to go out and enjoy the good things in life.
Invest Using a Hunch
It can be tempting to throw the dice at a company which seems to be making some significant progress. Going by a hunch, you’re likely to be ahead of the pack. You need to know how to read financial statements.
Debunked: Your gut feeling might be correct, but not always. What will help you is crafting an investment thesis? This will incorporate the company in question, as well as its competitors. Also, according to investment advisers, you might want to start small as you try and get the hang of things in the market.
You can learn the trends and gather information regarding the company through search engines if it’s a publicly-traded stock. If you are researching a stock, you can use their competitors to make predictions.
Instead of going with a hunch, seek the services of a reputable financial adviser with relevant experience in the field you want to invest in. Nevertheless, if you want to take a shot by yourself, then you better do some quality research before buying. You can follow the news, interview various players in the market, or read white papers.
Here are some ways to invest in the stock market with limited risk.
Taking a wise decision and knowing about the myth properly can undoubtedly help you to avoid getting into financial trouble which ultimately causes personal loans or bad credit if you are short of fund for paying them on time.
Are You Out of the Woods Now? Conclusion on Investment Myths
As you make investments, expect some wins and losses. However, don’t be quick to call it quits when you fall. Instead, pick yourself up, learn from the mistakes, and move forward.
After highlighting these myths and mistakes, the road to successful investments is almost clear. Here’s a guide on how to start investing profitably.
What remains is for you to polish your knowledge and keep learning. Consider developing your plan by using our investing calculator to see what it will take to retire off of your investments.
What are some of your most commonly known investment myths? Please let us know in the comments below. We’d love to hear from you.
Other How to Invest Money Resources
- How to build a dividend portfolio to ensure success
- Best robo-advisors compared to help you automate your investing
- How to use a 401(k) fee calculator
Subscribe to the Millionaire Mob early retirement blog newsletter to find the best travel hacking tips, dividend growth investing, passive income ideas and more. Achieve the financially free lifestyle you’ve always wanted.
No Comment