11 myths about investing

1. Investing is like gambling.

No, no and no. I wrote in post about investing that

Remember, that investing is not a gambling. You don’t risk your money to random output. There is always analysis, before you put money on market. You estimate expected profit, you set your acceptable loss. Of course, there is always risk, but it is not based on blind fate.

2. You need to be an expert to invest successfully.

Internet helps a lot today. You have the access to knowledge, news and tools. But you don’t need to spend 8h per day on charts and analysis. Everyone is able to invest successfully. Of course you need to have some knowledge and understanding what exactly you are doing with your money on the market.

3. You can’t beat the market

Of course most investors fail to do so, but there are some who can.

4. Always use stop-losses.

Honestly saying, despite I write there many times that you should always use it; sometimes I don’t follow this rule. When I watch the market everyday and I don’t have too many assets in my portfolio I simply don’t need it. A lot of investors using fundamental analysis don’t use stop-losses. They are pretty sure their picks will finally reach estimated price level and short/mid-term losses that could trigger stop-loss are not important in long-term range.

5. Always follow trend.

There is always a price level which is much higher than real value. On that level stocks are less and less attractive for buyers. It doesn’t matter that stocks are in uptrend. Finally, the trend would end and it’s better to leave the train near that point than buy stocks just before the fall only because there was strong uptrend.

6. Always diversify your portfolio.

Diversification is very important. But a lot of investors follow this rule in definitely bad way, buying a lot of different average stocks only to diversify their portfolio. This is not the way to go.

7. Buy and hold

Market is too dynamic for this strategy. When you hold, you miss a lot of brilliant possibilities to pick better performing stocks. And there is no guarantee you will succeed.

8. Investing in indexes is a very good way to go

I think recent results on index funds are enough as a comment to this point.

9. Invest at certain times

There are always interesting investing opportunities on the market. Just keep watching and you will find them.

10. High returns don’t have to mean high risk

If you don’t know what you are doing, it may be quite risky. The more experienced and conscious you are; the risk level is lower. Don’t limit yourself with assumptions that high returns are risky and better to avoid them.

11. Buy falling stock, they will eventually rise

Falling price is never a good signal to buy stocks. Wait until there are signals based on which you can expect rises.

photo credit: epicharmus