Investment myths debunked

Transcript

Investment myths debunked the difference

Between your average household myth and investing myths is that believing in the latter could end up costing you money.

Here’s a list of the most common investing myths so you don’t get caught.

You need to be a pro in almost any field
Amateurs will look to the professionals to see how it’s done in the investing world that’s not necessarily the case. According to industry data around 95 percent of fund managers fail to consistently outperform the market. That’s why lots turn to etfs or index funds to gain exposure to an entire market rather than specific portions of it when looking at the world’s major index funds.

Over the last 90 years you’ll see a solid upward curve. Exactly what you’re looking for!

Timing the market

Investing is about timing the market. When people picture investors they imagine an individual with lots of computer screens following different graphs and trend curves while making buy and sell decisions almost daily. In reality the best investors place their money on carefully thought out longer term bets. As we’ve said in the past, most people who try to game the market tend to fail.

If you’re watching for ups and downs, in the short term the likelihood is you’ll just sell when the price is dropping and buy when the price is increasing even if you’re successful doing it once. The longer you go on the more likely you’ll be to end up losing money overall so do your research and place your money in the indices and companies that you think will still be relevant and thriving in more than 10 years time.

This simple tactic will set you on a path to beating most other investors out there.

Safety in gold

There’s safety in gold. The appeal of gold is that it has always tended to hold its value. This is why when stocks go down or companies go out of business money tends to flock to it. However, this commodity still does come with some risks. Like any other listed item it is subject to market forces such as inflation and interest rate change so whilst gold does have some advantages over other stocks it’s not quite right to call it completely safe.

Investing is like gambling

The fact that investing comes with risks does not make it like gambling. It’s important to remember that whilst you can take a gamble with an investment you can’t invest in a gamble with a diversified investment portfolio.

You’ll be able to decrease the level of your risk exposure with investing. You put your money into a value generating activity that you believe will earn you sustainable income in the future.

From its real-world operations gambling on the other hand, creates no value and the one thing that’s for certain is that the odds are stacked in the favour of the house.

Past performance predicts future returns

It’s easy to think that stellar past results will predict a golden future but it’s not as simple as that. It’s important to take stock of the current situation of a company or index and then look at how you think they’ll perform in the future. The past might give a good indication but it certainly won’t reveal the whole truth. This is made clear by looking at some of the biggest companies who have come and gone or who have turned it around massively after previous weak performance.

A great example is Apple.

Looking at their past performance in the early 2000s you would have been forgiven for thinking Apple is a weak market player.Many investors missed out on huge gains because they didn’t believe in the company based on its history. But if they had looked closely at the products in the changing consumer market, they would have seen the potential for better future gains. It’s better to wait until you’re more experienced.

The strongest asset

The sooner you start investing the more that your money will be subject to the effect of compounding. By putting a regular amount of money away early you’ll see a far greater
potential for growth, that’s because the money you make each year will in turn make more money.

You need lots of money

Not true. With some investment apps or robo investors, you can start investing with as little as £10.