The investing world is filled with myths and fallacies. Is it really necessary to be wealthy to start investing in stocks? Is investing a complicated and risky endeavor? If you are only considering investing but need money right now, you can borrow from your parents or friends, financial institutions, or platforms like the Online Loans App.
So, if you’re still unsure whether to begin your investing journey, it’s time to dispel the most popular misconceptions.
1. Active investment is more profitable
There’s a popular opinion that active investment is the most profitable option. However, passive investment often allows you to earn more. The difference between the two options is the time you are ready to devote to the activity.
Start by deciding which investment style suits you best. Active investment requires more involvement: you will spend much time doing research, buying and selling stock, as well as analyzing and repeating the whole process again and again. Any step requires caution, as investing should not get you into a debt spiral.
Passive investment, as the name suggests, doesn’t require much input. Your involvement will be minimal, as you can relegate some responsibilities to the fund managers or purchase mutual or exchange-traded funds.
2. Investing is risky
Every worthwhile endeavor entails some level of danger. Still, comparing investing to gambling is fallacious. Investing in stocks and bonds is a systematic process that allows you to create value and generate income slowly. Investing should not be viewed as gambling because you determine the risk level, manage your investment portfolio, and decide when to invest and when to withdraw. So, invest wisely and never stop learning.
3. Investing is solely for retirement
For most people, investment is associated with a 401(k) retirement account. It couldn’t be further from the truth, as starting to invest while still young allows you to benefit from long-term investment strategies. Ultimately, think about it this way: you should use savings and checking accounts to cover day-to-day needs and replenish your emergency fund. The rest of your money should not stay idle in a bank account but instead generate additional income.
4. Gold will protect you against inflation
Is investing in gold the best way to protect your money against inflation? Not necessarily. Gold does have advantages, as it allows you to diversify your investing portfolio. However, gold is not a yielding asset, so don’t expect any dividends. Like with any other asset, the value of gold oscillates, and it may even lose its value. Therefore, gold won’t protect you against inflation.
5. Time is everything
Another popular misconception about investing is that timing the market — a term that refers to the rise and fall of the market — is pivotal for success. The reality is that predicting the perfect time to buy or sell is hard; instead, concentrate on building a diversified portfolio and be consistent in your approach. Statistically, you will be much better off investing regularly than waiting for the perfect moment.
The investing sphere is riddled with misconceptions. From the importance of timing the market to the miraculous properties of gold that protect against inflation — there are investing myths that discourage people from investing. Don’t allow these myths to stall you; instead, concentrate on workable solutions and strategies that will lead you to success.
