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Biggest Myths About Investing In The Stock Market

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Between business news sites, personal finance blogs, podcasts, fintech apps and social media, we are constantly flooded with information and opinions that shape the way we feel about our money – and more importantly, how we use it.

One tip we often come across is to put our money on the stock market, but the reality is that making such a move can be threatening. We know that investing can help us build wealth in the long run, and yet there is a risk involved. Not to mention, it’s hard to decipher what’s right and what’s not in the markets from everything we hear and read.

To help, Select has talked to two investing gurus about the common misconceptions in the market they hear, so we can dispel the myths and make sure your money works for you.

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Myth 1: Investing in the stock market is like gambling

On the surface, it is easy to see how people will relate between investing in the market and gambling. the last one The meme stock trend has shown how quickly investors can accumulate (and lose) insane wealth overnight. Erin Lori, notebook “Break the Millennium Money Calls” and “Millennium break takes over investments”, He even acknowledged that investing just for the sake of excitement can be more like gambling.

There are some similarities between the two, he admits Jeff Tsai, Co – founder of JAVLIN Invest, A new app that helps investors gauge the volatility of the stocks they hold in their portfolio.

“Both involve capital risk without knowing for sure if you will get a return,” Tsai explains. “But perhaps the biggest difference between investing and gambling is that in the long run, time is in favor of the investor while in gambling, time will be in favor of the casino.”

Patrick McGuinness, CFA, CFP and partner in a capital management company Moneta Group, Agrees that investing is a long-term game where the investor is likely to benefit from sticking to it over time.

“In gambling, someone wins and another person loses,” McGuinness says. “An investment is a profit, and that profit is distributed to shareholders, making it a long-term way to accumulate wealth in the face of short-term speculation.”

And with an investment, it’s not a bad idea for someone to guide you along the way. A financial advisor can help you find long-term investments in your portfolios so you can avoid unnecessary risk and jump on anything that is today’s hot memes stock.

Myth 2: You can time the market

Myth 3: The more stocks you own, the more diverse your portfolio will be

Myth 4: Percentages of increases and percentage of losses are equal

Understanding the percentage of gains and losses over time is important for investors because it helps them determine their rate of return, or their net profit or loss over a period of time. The challenge is to think they are equivalent when you do the calculation.

Tsai provides an example: Say that yesterday you went down by 10%, but today you went up by 10%. You might think you’re back to where you were two days ago, but that’s not true. If you started with $ 100 two days ago, you lost 20% (or $ 20) yesterday, and then you earned 20% today, you only have $ 96: a loss of 20% of $ 100 means you were left with $ 80, but a profit of 20% of $ 80 is $ 16, which brings you to $ 96.

In fact, you would need a 25% profit to return to $ 100: 25% of $ 80 is $ 20. What do you want investors to be careful about? “Our brain can easily outwit us,” he says.

Myth 5: Investment is for the rich

While investing money in the stock market was previously reserved for those who had a large enough amount to invest and The means to hire a specialist to guide them, this is no longer the case.

Today, thanks to the advent of Online brokers and advisors mostly free of fees, anyone can trade with just a small amount of money (or an investment in knowledge, really). Most advisors are basically software that uses algorithms and data to invest in your name, depending on your investment goals, time horizon and risk tolerance.

Robo-consultant with the highest rating praise There is no minimum that investors have to meet, and the annual account fee is 0.25% lower than your fund balance. So, if you have $ 5,000 invested in Betterment, you will only pay $ 12.50 each year.

Women, in particular, may consider a counselor for the most part Ellevest. Its platform algorithm addresses important realities in women’s lives, such as pay gaps, career breaks and longer life expectancy, so that women can get a real sense of their financial situation. Ellevest offers three different levels of membership, ranging from $ 12 to $ 97 per year.

The Bottom Line

While not everything we read or hear about personal finance is true, there is one line of messages we can all agree on: Investing our money in investments can help us build real wealth.

Now, the next time you come across one of the top five myths about the stock market, you will know how valid these statements really are and you will be able to adjust your plans accordingly.

Keep up to date with Select’s in-depth coverage of Personal funds, Technology and tools, health And more, and follow us Facebook, Instagram and Twitter To stay up to date.

Editing note: Opinions, analyzes, reviews or recommendations expressed in this article are those of the Select system team only, and have not been reviewed, endorsed or otherwise approved by any third party.

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