Stock Market Myths That Too many People Believe
Let’s face it! People do not see stock market investors with good eyes. Those that do not have financial training do not actually understand so much about financial investments. A lot of individuals that could make a lot of money avoid the stock market because they believe in the myths that are associated with it.
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We will now talk about the 5 that are the most common. Do not believe these myths!
- Only Rich People And Brokers Make Money With The Stock Market
Some people will say that they can predict every single thing that will happen in the market. This is something that is 100% false. In addition, the tools that were only accessible to those rich people and brokers in the past are now available for all people. This means that you can actually start learning what to do in order to make smart investments. You do not need a huge capital in order to be a player in the stock market.
- You Gamble When You Invest In Stocks
Every single broker hates this statement because he knows that it is not true. Most people avoid the stock market because they see it as being exactly as gambling. That is definitely not the case. Gambling is in no way similar to investing in stocks. When you buy stocks, you buy a part of a company. The holder basically has a claim on business assets and a fraction of all profits made. You should never look at shares as being trading vehicles. Financial tips websites keep talking about this but people still keep thinking that they would be gambling when investing.
The stock market sees investors fighting to figure out how much profit will remain for shareholders. Stock prices constantly fluctuate and it is true that values can go down but the main focus is put on future firm earnings. We have to look at buying stocks as being an investment.
The real problem is that it is not at all easy to figure out what a company is worth. We have various variables that are linked to short term movements in market prices. They do look random but on the long term, things change. Firm value automatically has an impact on the long term evolution of the stock prices linked to that company.
Gambling is entirely different. It will simply take money from the loser and the winner takes a portion of losses. You do not have value. When you invest, you basically make the entire economy stronger.
- Fallen Stocks Always Go Up After Some Time
One of the biggest mistakes that you would make in the stock market is thinking that the values that are low for a long period of time always go up. That is definitely not the case. For instance, let us think about two companies. The first one had a really good year with all time highs recorded at $100 in the previous year. However, now the stocks went down to $50. The second company is small but has a stock value of $20, up from $10 in a short period of time. The problem is that most investors go for the first company because they think that in a short period of time the values will go back to over $100.
Never think like that. Experienced investors think about a lot of things. They are not only focused on stock price. You need to buy good shares at prices that are reasonable. When you only think about market price and you buy because it fell, you open the doors to a bad investment.
- All Stocks That Go Up Will Go Down
There are so many different situations in which companies went up in value and then continued the rise over several years. If you believe the stock market myth above, you can miss out on many different opportunities. The big problem is that really big drops are usually covered by the media because humans have a tendency to want to hear about failure instead of success. Corrections do happen in the stock market but we need to understand that stock prices are basically reflections of how the company is doing. When the company goes great and is run by really good managers, stocks go up.
- If You Have Some Knowledge, You Can Invest In The Stock Market
This is so dangerous. There are many situations in which people read a book or a blog post and think that they have enough knowledge to invest in the stock market. The individual investor needs to always understand what he does and if only some knowledge is available, this is a recipe for disaster. It is as if participating in a questions and answers TV show that asks questions related to country capitals from around the world and you only know the capitals in Europe.
If you do not know much about the stock market and you feel that you do not have the necessary experience to make a really good investment, there is a pretty good possibility that this is the case. You should consider hiring advisors in this case. A lot of people do not invest with advisors due to the fact that they need to pay for such services. Well, this is a lot better than investing in a market that you simply do not understand.
The bottom line is that the stock market is available for every single person that wants to make an investment. However, you should never go into something that you do not fully understand. We have to see the partially informed beginner investors as being doctors that did not make any operation in the past. Would you have such a doctor perform surgery on you? In a similar way, you should never invest if your knowledge is small or limited.
You can enter the stock exchange market and you can be successful. However, this should only be done in one of two ways. The first one is hiring an advisor and the second one is learning how to make investments yourself. The second option takes time. If you want to enter the market now, the first option is the one that has to be considered.