The stock market helps companies raise cash so they can invest in and expand their businesses. On the other side, the stock market allows the general public to fund such business investments by purchasing shares of company stock. In return shareholders expect the value of their stock holdings to increase over time. In general, stocks tend to rise but it’s not always so simple whether you’re new to the stock market or are an experienced investor. It’s easy to let common stock market myths creep into your head and affect your investment decisions. So let’s see the Top 10 Myths Of Stock Market.
Top 10 Myths Of Stock Market are:
Investing is gambling
Many people avoid the stock market because they feel it’s too risky. Investing in the market is risky and no investment is without risk. But it’s important to note that while the stock market will have its ups and downs. Investors in general earn large returns if they invest in the market over a long period of time. If you want to decrease your risk choose stable household name companies and consider allocating some of your money into bonds.
You need to be an expert to invest in the market
Reading news articles about wall street wizards with PhDs using quantitative analysis to consistently pick stock winners can be a bit intimidating to the average person. You may conclude that you’re just not smart enough to invest in the stock market. Not true having and sticking to a smart investment plan is more important than having a deep market knowledge or using sophisticated algorithms. Don’t let the daily rotation of the market sway you from your plan.
Investing is for the rich
You might see a high-priced stock that sells for a thousand dollars per share and conclude that the market is just too rich for your blood. Some mutual funds require a few thousand dollars for you to get in but that’s not the only way to invest. Many platforms allow you to purchase fractional shares of stock and exchange-traded funds. Some services even have no minimum to get in and don’t charge fees.
The stock market always goes up
Despite what you might hear from some vocal personalities that the stock market doesn’t always go up. Now it’s true that on average over the long term stocks will earn you a good return but not always. Stocks correct over time as well as much as 10% a year and 20% every few years on average. So be prepared for some bumps along the way.
Good companies will have a good stock
It seems natural that a strong company will give investors confidence to buy their stock and you’ll see those share prices go up. This is not always the same, even the best companies can take a big fall. For example, when the tech bubble burst in 2000 the market crash took even the strongest tech companies with them and as we’ve seen during the Covid-19 pandemic even the strongest airline stocks went crashing down.
IPO’s will make you rich
There have been many successful initial public offerings that have made people filthy rich. But you tend not to hear about the IPO’s that failed. In fact, IPO’s fail more often than they succeed. So IPO’s aren’t the gold mine that they’re sometimes made out to be.
You always should invest in what’s moving in the market right now
It might make sense to buy into the hottest stocks of the moment. After all, their prices are rising and you should ride that wave all the way up to the top right. No this is wrong. Some investors have used this strategy successfully but only if they got in early enough. If you’re following the crowd it may be already too late to get in.
What goes up must come down
This myth suggests that there’s some sort of gravitational force that pulls down on a stock or the broader market. Of course, stocks and indexes are correct but there’s no fundamental reason to assume that markets must fall simply because they’ve gone up.
Stock on the ropes will bounce back
This myth is basically the inverse of our previous myth. It says that if a stock has taken a tumble it will inevitably rebound. Now, this kind of scenario can be a great way for you to buy into a good stock on the cheap but there’s no guarantee it will come back. In fact, it could fall even further.
Higher risk equals higher returns
It’s true that increasing your risk could give you bigger gains. But big risk will also mean big losses. You’ll do better by investing in lower-risk stocks over the long term. Still doesn’t mean you can’t have some fun. Allocate a small portion of your portfolio to riskier home-run plays and swing for the fences.
So if you are a beginner then do your proper homework before you start your trading journey. Don’t just believe all the myths of the stock market and affect your portfolio. I hope you got a good understanding of the Top 10 Myths Of Stock Market.