5 Very Common Investment Myths Busted

If you are a potential investor or want to diversify your investments, but aren’t sure if you should, you have stumbled across the right article. The general mindset for investing in a non-government platform is having RISK. A lot of investors try to time the market, invest only when the market is high, try to find the auspicious Time or we can say "Muhurat" to invest and so on. But do all these things matter? In this blog, we will demystify 7 investment myths that concerns every potential investor.

Myth #1: I am too old to start investing!

If you are in the “I never took a chance when I was younger, I don’t want to take a chance anymore” category, then that’s probably not the right way to go about things. Yes, it is advisable that you start investing towards the beginning of your career and earlier, the better. But that doesn’t mean you can’t begin your investment career late. You just have to be tactful about which investment platform you’re choosing and where you are investing. Today, We have a lot of opportunity to invest. The twenties is the time when one begins to understand the concept of savings, investments, and returns. It is the time when, along with a basic understanding of financial planning, you also have savings in hand that you can invest. Among others, Mutual Funds and Stock market are one of the best investment options for people who wish to invest early. You can save money, and grow wealth by investing in mutual funds or stocks from early on.

You can be benefitted from the power of compounding after invest in Stocks or mutual fund
(Money grows if you give enough time)

Compounding is earning returns from existing returns. Because of compounding, with time, your investments grow at a relatively faster pace as compared to the scenario when you invest late . So, the earlier you start to invest, the better mutual fund returns you are going to get at the time when you require the money to fulfill your goal. You can Have 1 Cr. after few years and so you can retire early. Just By investing Rs.5000 a month, you can reach 1Cr. mark after 20 years. Thats called a power of compounding.
so for better life you need to start invest early.

Myth #2: Investing Is an Expensive Affair

 

This myth probably stems from the fact that some people hire professional financial planners to look over their investment portfolio. But it’s not necessary that you must too. Let’s put this straight, investing is not rocket science! If you garner basic knowledge about the platform and instrument you are investing in, you do not have to hire a third party to look over your portfolio. Sometimes the platform you invest via, can give you free investment advice as well.

Myth #3: I’m Not Rich

“Investing is a rich man’s game”. The above is one of the most common assumptions. If you look at history, some of the most successful investors like, Rakesh Jhunjhunwala and warren Buffet, were not born with a silver spoon. Its imperative to remember that your portfolio grows with every penny. You can start investing with a small capital and grow your financial portfolio from there. The power of compounding helps in this regard. All you need to do is, be smart and grab the right opportunities.

Myth #4: Go Safe, or Go Home

If you still feel that only government backed instruments are the way to go, then there’s a lot for you to read up! Today, there is a plethora of investment opportunities which are safe and give you decent returns. Granted that instruments like fixed deposits and recurring deposits are extremely low risk, but what about your returns? The current FD rate is 6-7% per annum, Which can't even beat the inflation rate. However, there are instruments through which you can receive a return of 15% (post tax) and which are relatively safe as well.

Myth #5: Stock Market is a gambling and purely based on luck.

There is a myth in the market that the stock market is just like gambling. People who invest in the financial markets are just speculators and are lucky enough for their trade. Although there are a few similar features to investing/trading and gambling, they are very distinct.
The variance in risk and return is the point of distinction between gambling and trading. In stock markets, yield may be greater than risk, while the risk is greater than yield in gambling. Stock markets encourage us to be both a buyer and a seller, while you can only be a buyer in gambling. Given the above people, lose money mainly in stock markets because they put money into stocks without knowledge or analytical skills. If you treat stock trading like a gambler, so it is certainly gambling for you.
In the stock market, you have, an edge called statistical advantage, the key to success is doing continuous research, and you make decisions that are more informed whereas in gambling you more depends on the luck factor. Trading will be similar to gambling when you just take random stocks and make transactions.
When you invest in something to generate profits, it becomes business. In businesses or trading, reward to risk is high, people lose money only when they fail to understand the risk to reward ratio before arriving at any decision. In gambling most of the time it is the dealer (bookmakers and casinos), who generate profit you speculate and the odds are never in your favor.
Gambling is psychological and related to the lottery where you are ready to lose a small amount of money in anticipation that you will get a large return. In trading, you can predict or define your range of rate of return. Not only do gamblers trade with thoughts in dreams, but also with a risky lack of market analysis and risk management. Their purpose is to trade, not to study charts, and monitor risk.
Traders tend to focus on profound research and logical thought. In games such as poker and blackjack, some elements make it more like trading, if you are smart enough and apply analytical skills there are chances that you can bring yourself in a position that can increase the probability of winning and bring down the odds in your support.

At some point in time, traders might have gotten lucky or unlucky based on different circumstances but in long run, it is all about making informed decisions based on certain strategies, skills, risk tolerance, and other parameters, etc. Trading, however, if done skillfully and artfully, can put you in the position of the house, and Is no more gambling.
The trading strategies should not be complex rather well tested and in limits with a disciplined approach. A trader predicts the market trend based on past trades and accordingly plan their strategy for every trade using technical and mathematical analysis. A must requirement for stock trading is logic and reasoning.

Investors judge previous trades and then prepare their approach, i.e. where to spend, how much to buy, and how much to spend. The best traders have their exit plans in place before entering into the market. Trading in futures and options should be used as a risk management tool for hedging purposes. For example, you are a farmer and believe that the prices of your goods may come down or go up out of any negative situation hence took a position in commodity futures to offset risk on the current product.
The key to success in diversification, monitoring, and follow the trends and respond quickly. Trading is a long-term game, but its short-term excitement appeals to many people. A winning trade provides them with the dopamine rush required, whereas a losing trade induces great pain.
An advantage in trading is when you place a trade and stock doesn’t move in the direction you want the stock to move you can sell it off any time and protect your slice of initial investment back whereas in the same case in gambling you can lose all if you chose a wrong bet.

A successful trader has consistency, self-control, and emotional well-being. Stock market trading is very volatile and depends on many factors hence volatility factor makes it very difficult to predict. In gambling, one wrong move can kill your financial wealth, emotional stability, and sometimes your relations too.

It can be summarized as the following:

In Trading, Reward>>Risk

In Gambling, Risk >>Reward

KEEP INVESTING !