As far as stock market (or share market) investing is concerned, many of us have our own preemptive assumptions about it. As per Business Standard, only about 3.7 percent of India’s 1.36 billion people invest in stocks. This number is insignificant as opposed to 55% of the US population directly or indirectly investing in the equity market. Now we understand that investing your hard-earned money in the stock market does necessitate some considerable thought. But sometimes, not investing in the market can keep you deprived of the many lucrative profits that the market can offer you.
What holds most individuals back from investing in the stock market are a few myths that are assumed to be true.
Most Common Myths About Stock Market Investments
Today, in this blog, we’re going to bust those myths and reveal how much truth these myths really hold. Read till the end to comprehend how many myths and misconceptions you’ve been considering true that are actually false.
1. Stock Market Investing Is Just For The Rich People
When we hear the term, ‘investing‘, most of the time we tend to anticipate that investing is only for wealthy CEOs and stockbrokers on Dalal Street. However, you don’t need lakhs of rupees to set up an investment portfolio. Even a small initial investment can yield significant returns in the long run. Depending on the investment strategy, diversification across multiple asset classes and locations may be possible with mutual funds. These are accessible with a minimum investment of as low as 500-1000 rupees or with a SIP (Systematic Investment Plan).
2. I’m Too Young (Or Too Old) To Invest
Investors and traders in today’s information age are mostly choosing to invest in markets at earlier ages than previous generations. Thanks to technological advancements, we now have instant access to whatever we need to know with the click of a button. If you want to learn more about investing according to your age bracket, you can find a lot of information online. The great news is that financial literacy can be acquired at any age.
It’s tough to see too far into the future when you’re young. You’re present-oriented and have an active social life. But when you’re older, you’ll have lots of time to consider investing, right? Wrong. When it comes to investing, time is a huge benefit. Long-term investment techniques are less volatile and can help you develop wealth through interest compounding.
3. Investing Is A Complicated And A Time-consuming Process
Many people feel that they must devote a significant amount of time to managing their assets. However, this is not the case for some types of investments. Many investments require a brief strategy or are professionally operated with minimal interference.
Short-term stock investing necessitates some time and energy spent regularly watching market movements and company performance in order to have enough knowledge to make sound investment decisions. Even in this situation, there are many online trading platforms that can give you sophisticated research tools to help you simply evaluate market fluctuations and find market entry and exit opportunities.
4. You Always Lose Money In The Stock Market
Stock markets are undeniably volatile. However, individuals who invest without first mastering the principles or who panic and exit stocks due to short-term volatility incur the worst losses. Stock market investments, on the other hand, demand patience and a thorough understanding of market dynamics.
It’s also critical to avoid herd mentality and market timing. It’s very hard to time the market, so staying involved for the long run is critical. If necessary, you can also opt to seek expert assistance.
5. Stock Market Investing Is Similar To Speculating
This has long been one of the most popular stock market fallacies. Most investors believe that investing in the stock market is equivalent to gambling because only losses are possible. However, this is not the case. Equity markets create value since owning a firm’s stock is the same as owning a company. As an investor, you are entitled to a portion of the company’s profits.
Betting, on the flip side, has no value because you do not acquire any property. Furthermore, unlike gambling, the stock market lacks the concept of a zero-sum game, in which one’s winnings are equivalent to the collective losses of others.
6. You Always Need The Assistance Of Brokers While Investing
This is another prominent misunderstanding that many folks have when it comes to stock market investment. You can invest on your own if you have a good amount of knowledge of the market and the time to monitor market changes. Only a Demat and a trading account are required. The former allows you to hold stocks in an electronic format, while the latter is essential for stock trading.
Picking up good stocks only needs you to have a basic understanding of the businesses you are investing in.
7. High-Risk Stocks Guarantee High Returns
This is one of the most prevalent myths that has been around for a long time. High-risk investments don’t always yield high profits. The only thing that can give you high returns is your own research of the market. The quality of your research is what would determine the return potential of the respective company’s stock. And even with low or moderate-risk stocks, you can make a lot of money. Purchase high-quality businesses led by high-quality management at a reasonable price with plenty of room for mistakes. So, by buying stocks of good businesses at a low price, you are not incurring a big risk.
Most people have a set of erroneous beliefs regarding the stock market that is simply not true. We hope that this blog post has helped you dispel those misbeliefs and shed some light on the reality of the stock market.
The stock market can be a great inflation hedge and can safeguard your funds from inflation to a good extent. It can also provide much better returns on average compared to bank interests and other financial institutions. Another important thing that you must keep in mind to thrive in the stock market is to do an adequate amount of research prior to investing a single rupee.
Important note: Nothing given in this blog is financial advice. After all, there's no use in putting your hard-earned money into the stock market without research, which can potentially lead to great losses.
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