When people think of investing, especially Pinoys, the stock market is what comes to mind. And with this thought, a lot of misconceptions about investing in the stock market follow.
Today, we’ll talk about 14 of these myths and misconceptions.
1. I need a lot of money to invest in the stock market.
The minimum investment has significantly gone down through the years. Today, you only need P1,000 to open an account for most stockbrokers. And you can start investing in equity funds (stock market funds) for the same amount as well.
You don’t need to be rich to start investing. In fact, you need to start investing if you want to be rich.
2. I’m too young to invest in the stock market.
One of the world’s richest men, Warren Buffett, bought his first stock market shares at the age of 11.
Start as early as you can so that time will be on your side. Because the longer you are invested in the stock market, the better.
3. Investing in the stock market requires a lot of time.
Investing in the stock market will take as much time as paying your bills online. It will only take less than 5 minutes.
Given that you’ll need to study and do research occasionally, this will take only a small portion of your free time. Plus, you can invest in equity or index funds, and just let fund managers do the research for you.
4. It’s easy to make money in the stock market.
It’s fast and easy to invest in the stock market, but it’s not fast and easy income. The stock market is not a get-rich-quick way to make money.
Investing requires patience and learning how to manage your fear and greed. When stock prices fall, it’s not easy to stay calm and not to panic. When prices are going up, it will be challenging to control your greed.
5. I should invest all my money in the stock market.
Financial emergencies can happen at any time. Thus, you want to avoid days when you desperately need the money and you have no choice but to sell your stocks at a loss. So, always leave money in your savings as your emergency fund.
Moreover, minimize your risk by investing in other assets and securities as well. Diversify your investments. As the cliche goes, “Don’t put all your eggs in one basket.”
6. I can just follow other people’s stock market tips.
There are a lot of people, groups, and communities that give stock market tips and it’s tempting to simply follow them. Be careful, some of them have ulterior motives or are just pretending to be experts.
It’s always better to have your own investing strategy that fits your personality and is aligned with your financial goals.
7. I need to find the best investing strategy.
There are different ways to invest in the stock market and there’s no best strategy that works well all the time with anyone. However, it’s best to start with a strategy that fits your lifestyle, personality, and financial goals.
And even then, your strategy will change as your investment size grows and as the economic situation changes. Thus, it’s important to know how to adapt and evolve your strategy.
8. I will invest when I have extra money.
Investing should be a habit, it’s something you do regularly and not just once or when you have extra money.
The best way to grow your wealth is to invest as often as you can. The small regular amounts that you invest today will eventually compound and grow to a significant amount in the long run.
9. I need to be good in Math to invest in the stock market.
Investing in the stock market is not rocket science. You don’t even need calculus to understand it, just basic arithmetic.
There are different ways to invest in the stock market, and there are strategies that are simple and effective and don’t require you to be a genius to do. At best, you’ll only need guidance to do those strategies properly.
10. The stock market is like gambling.
It is gambling if you don’t know how the stock market works and you’re not following a proper strategy. Unfortunately, a lot of people do this and that’s why they’re losing money in the stock market.
Stock market investors who took the time to study and do their research will tell you that it’s not like gambling at all. You’re not playing against the house that always wins; you’re buying a real company with real prospects for growth and income.
11. I need a guru, coach, or mentor to make money in the stock market.
There are investment managers, financial gurus, stock market coaches, and expert mentors that help people invest effectively in the stock market. But no, you don’t need them.
You can invest, make money, and be successful in the stock market on your own. Just put in the time and effort to learn for yourself.
12. I have mutual fund investments already, I don’t need to invest in stocks anymore.
Investing directly in stocks is a way to diversify your portfolio, especially if all you have are mutual fund investments.
Moreover, you don’t really have to choose between stocks and/or mutual funds. You can definitely invest in both.
13. I should not invest because the stock market is up/down.
It’s always a good time to invest if you’re investing for the long-term, but most especially when the stock market is down.
You can try timing the market, but those who simply invest regularly will still be able to grow their portfolio effectively.
14. I can just buy popular companies in the stock market.
Buying the biggest, most popular, or those blue-chip companies in the stock market is a common strategy for long-term investors. But it’s always best to still do your research and evaluate a company’s long-term growth potential.
Some companies stagnate after a few years, or worse, eventually lose their business profitability. If this happens, it’s time to take profits and invest in other companies.
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