Starting from business news websites, podcasts, personal finance blogs, fintech, and social media apps, we are flooded with information and advice shaping how we perceive money and how we use it.
One piece of advice people usually come across on the internet is to invest in the stock market, but the fact is that making such a move might be difficult. We know that investing can help us build wealth from a long-term perspective, but it involves risks. Everything we hear and read about the markets is hard to interpret what is true and what is a lie.
Here is a list of misconceptions about investing based on two investing gurus.
Myth 1: Investing in stocks is similar to gambling
Co-founder of JAVLIN Invest, Jeff Tsai, admits some similarities between investing and gambling. Tsai explains that both involve risking money without knowing if you will get a return. He added that perhaps the most significant difference between gambling and investing is that from a long-term perspective, in gambling, time would favor the casino. However, in investing, time is in favor of the investor.
Myth 2: The more stocks you hold, the more diversified your portfolio can be
Tsai says that this can be true to a certain degree. However, the idea is to determine how these stocks react to specific market conditions.
Investors should know that correlated stocks move up and down simultaneously, while uncorrelated stocks move in opposing directions.
Myth 3: Percentage gains and percentage losses are equal
Investors should understand the importance of knowing percentage gains and losses over time because it helps them define their net profit or loss over a certain period. The challenge is that these percentages seem equivalent when you calculate.
Myth 4: Investing is for the wealthy people
Nowadays, anyone can trade with a smaller amount of money after the emergence of Robo-advisors and zero-commission online brokers.