Investing money. Something every young person would love to do. Make some money and then invest it to make even more money.
When I first got into “investing money” at a really young age, I believed some of the common investing myths that existed. I never took the time to perform the proper research. I just took mainstream information at face value. As I’ve slowly evolved as an investor, I’ve come to realize that most of the investing basics that are out there are simply myths. Let’s take a look at some common investing myths:
Investing is way too risky.
Walking alone at night can be risky too (unless you’re tough like me!), if you’re not prepared. You shouldn’t opt against investing because you feel that it’s too risky. If you take the time to find the accurate information, you’d be surprised to find out that investing doesn’t have to be all that risky at all.
High yield savings accounts suck.
While an online savings account won’t give you the highest return, it’ll provide you with a safe return. If you feel that investing is too risky and you don’t have the time to perform any research, then you can always put your money into a high yield savings account where it’ll slowly accumulate interest. Earning a little bit of interest beats not investing your money at all, or even worse– taking on really risky investments with a slight chance of a high return.
Real estate is the best investment.
Not to say that real estate is the worst investment. Its almost become an axiom in the investment community that real estate is usually the best way to go. The thing is that there really is no “best investment” or an one size fits all investment strategy. Every investor is different. Some investors have more capital to work with, while other investors have a higher risk tolerance. The best investment will always depend on what type of investor YOU are (more coming soon).
Diversify all the way.
Diversification is important. However, it’s not an excuse to purchase random stocks and mutual funds just to “diversify” your portfolio. Diversification should be highly emphasized in your investment portfolio, but it shouldn’t be an excuse to take on high risk investment opportunities.
You need a Financial Advisor to invest money.
These days all you need is an internet connection and an online banking account if you want to invest money. Sure there are situations where you will need to hire a financial planner, but the novice investor doesn’t need to incur the cost associated with paying someone to manage your money.
What are some common investing myths that I missed?
Further reading:
What kind of investor are YOU right now?
6 Investing myths
Keep investing simple
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One more myth – if you read about a stock recommended by a big name financier in the newspaper, you should buy. In fact, if they recommend it, it’s because they hope to squeeze a little more value out of it before they unload it and the price goes into free-fall. They rarely recommend something until they have taken all they want of it (Why would they create a rush to buy something they still want more of?)
I’ll totally admit that my first stock purchases were made with the help of a Money magazine “Hot Stocks” issues. Bad call on my part, but I didn’t invest much at all (<$2,000) and just ended up losing time more than anything.
Another myth – Invest in gold. You see advertisements for gold investing everywhere now. Gold is in a speculative bubble, the price of gold in no way reflects it’s intrinsic value. When people realize the price is held up purely by speculation, it will burst.
Great points. I second Edwin’s point. Gold may be high right now, but if the economy truly is stabilizing, and that like Edwin said, it’s up right now because of speculation, it will indeed burst…
I am looking forward to the Fed raising the interest rates.. I’m ready to get more than 1.10% on my savings! I just don’t have time to do the research!
Great article. I totally agree when you said, the best investment depends on what type of investor you are.
I believe these myths are very popular because money is such an emotional subject. In most cases, investment decisions are driven by fear. The reason some people diversify, or think they need a financial advisor to invest for them, or believe that investing is risky is simply because they are afraid to fail. Unfortunately, failing is also one of the most effective ways to learn and gain the confidence to become better at investing your own money.
Great points above, some of the best advice I have heard is to simply do the opposite of everyone else is doing. As Warren Buffett said, get greedy when others are fearful, and get fearful when others become greedy.