Guide to Investing: 3 Myths that can prove to be Costly


There are myths circulating in the various markets that can cost you money if left to be believed as facts. This article can be considered as your guide to investing in terms of knowing which beliefs circulating the vast field of investing are actual myths.

Myth Concept--the word myth in the middle of piles of coins

Here are three myths in the field of investing that you should be aware of.

Myth #1: The amount of hype the company receives should be enough reason to buy its stocks
Keep in mind, there’s a huge possibility that by the time you hear about a hot company, its best days as an investment has already come to pass. Even if you enter a hot initial public offering or IPO does not necessarily mean that you’re getting in on the ground floor. IPOs normally go through several rounds of financing received from individuals or companies. Its most likely that the ones receiving the most value for their investment are the venture capitalists and private equity firms that decide to invest in these companies.

Myth #2: You need a lot of money before you can invest
It is true that you must be able to leave your capital when you decide to invest; you should reconsider investing in stocks if the money you’ll invest needs to be used within 10 years. Investing in stocks takes time in order for your investments to turn up profits. You should keep in mind that the market could still hit a downturn and you might not have time to wait for your investment to recover.

Despite this, you don’t really need a huge amount of money to begin investing. There are retirement plans offered in workplaces, such as 401ks, that will only take up as little as 1% of your salary. If your workplace does not offer these plans, then you can start an IRA. An investment in the Vanguard 500 fund normally has a minimum of $3,000, but once you open an IRA, it drops to $1,000.

Additionally, making small but consistent investments can build up. For instance, you can start with investing $1,000 a year (roughly $84 a month), and after 40 years, that can amount to over $250,000 if you receive the 8% average annual return that stocks were known to offer over long periods of time.

Myth #3: Your age should dictate the amount of risk you take
Those who have come prepared with financial plans know that in order for your retirement fund to continue being relied upon, you must keep a substantial chunk of it invested in stocks even during your 50s and 60s. Research found that stocks actually offer returns that can beat inflation while simultaneously improving the odds that you won’t run out of money in retirement.

Final Thoughts

Don’t believe everything you hear. Word of mouth is not the most reliable source of news, and you should keep that in mind. There are people speaking based on experience, but situations and experiences vary depending on people. Remember that experience and research are two of the best ways to garner knowledge about investing.

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