Debunk the 6 myths about stock market investment

When you start investing in the stock market, everyone you come across have some or the other advice to share. 'The markets are risky', 'You need an insider to succeed', 'Stock trading is just luck,' all this and more you would have likely heard.

The simple truth is when it comes to personal finance, you are always likely to get unsolicited advice. However, for any investor about to take stock trading, it is imperative they have an accurate understanding of stocks, stock movements and trading. There is no point in blindly following someone else's misconceptions. Here are six of those myths you shouldn't fall for

#Myth 1: Investing is complicated

Yes, this is the one you would have constantly heard. In reality, though, it needs a tweak – share trading is only as complicated as you make it. The fact is that share trading can be as simple and easy as you want it. All you need to do is do a bit of research and understand market movements, to enhance your investment portfolio.

#Myth 2: Stock trading is as good as gambling

Gambling is a zero-sum game where a loser hands over his money to a winner. So, the comparison is foolish. When you invest in a share in the stock market, you are essentially representing ownership in a company. As a shareholder, you are entitled to claims, assets or even fractions of the profit. Unfortunately, investors make the mistake of seeing a stock as a trading vehicle rather than stock ownership.

Shares constantly fluctuate to the beats of the markets, leading investors to persistently assess their profits. That is why assessing a company's value can seem complicated. After all, there are tons of variables involved, and the company's outlook is always changing, and with it, the company's future earnings.

#Myth 3: The stock market is determined by those who matter

Often young investors are likely to take the advice of a famous market advisor and consider it as the gospel truth. But, as the market has proven over and over again, market moves aren't dictated by the viewpoints of just one person. It depends on various factors like supply and demand, interest rates, political factors, inflation, and so much more.

#Myth 4: The stock market is meant for the wealthy

Many investors believe that investing in the stock market is only meant for the rich and those who have access to tons of cash. Literally, this is so not the case. You can invest as little as $100 a month if you plan to start investing in the stock market. All you need to do is set up a trading account, fund the account and start placing your orders. The markets are easily accessible, and investing is getting easier and smarter.

#Myth 5: Fallen stocks eventually will rise

There is an old Wall Street adage that goes, "Those who try to catch a falling knife only get hurt." And it is pretty accurate in the trading world. Many see an appeal in buying stocks at a lower price; however, if the stock is at a 52-week low, you need to rethink your strategy. After all, an investor's strategy must not be to look at the cheapest stock but invest in promising companies at a reasonable price.

#Myth 6: Stocks that go up will come down

Honestly, not necessarily. Simply put, you can't apply the laws of gravity to the stock market. When you invest in stocks, you need to check the strength of the company and how it is valued. Take Berkshire Hathaway, for example, whose stock rose substantially from $7,455 to $17,250 per share in a period of little more than five years. And if you think the Warren Buffet company dropped in shares, think again. The price of the stock is a whopping $462,435.03, as of US markets close on March 1, 2023. It is true that stocks undergo corrections, but what is important to understand is that a stock price is only a reflection of a company, and when you find a company run by excellent directors and a clear vision, then the company’s stock holds promise.

The only way to create a defence against such common investing myths is by educating yourself. If you can understand simple facts about investing, you can easily battle these misconceptions. If you need to learn to trade in the stock market, you can always connect with credible investment consultant.