Top 3 Common Investing Myths Debunked
We all want to make our money work for us, but how many of us actually commit to educating ourselves and taking the first step to invest?
The answer is surprisingly few. Wall Street paints an intimidating picture of the world of finance, prompting us to ask ourselves ‘so where do we start?’ Today, we will dispel the myths surrounding investing and help you distinguish fact from fiction so you can invest with confidence.
Firstly, what is investing?
Investing is the act of committing money, into financial avenues with the expectation of generating a positive return.
Let’s take a deeper dive into the 3 most common investing myths.
1. “Investing is gambling”
Investing and gambling both involve the act of risk-taking in the hopes of making a profit. However, they’re not the same. Unlike gamblers, investors typically buy assets that they expect will generate a financial return over time - like rent from a property or profit from a business activity. Investments also usually have a positive ‘expected value’ (they go up more often than they go down). There are many ways to reduce risk and improve ones’ chances of earning a greater return over a period of time, e.g., maintaining a diversified portfolio.
As such, educated investment is very different from gambling.
“Over the past 10 years, the S&P/ASX 200 Index has recorded an average total return of 9.3% per year.” - 6 August 2021, ASX
As Warren Buffet wisely once said, “the stock market is designed to transfer money from the active to the patient”.
Historic performance is not indicative of future performance.
2. You need a lot of money to get started
Today, there are many ways to start investing with simply a few dollars. In our digitally advanced world, we are blessed with a plethora of valuable information about personal finance, wealth creation and investing. There are plenty of mobile applications and online platforms that offer low cost options and assists a beginner’s investment journey.
For example, Upstreet allows you to earn fractional share rewards as you shop with your favourite eligible brands. It’s a great way to integrate an investing mindset into your daily life.
3. “Shares” are the only option
Shares, equities and the stock market… these are the main catchphrases we hear when we think about investing. However, here’s a list of other investment options:
- Real estate
Overall, the finance world may seem daunting at first glance. However, nobody (not even finance professionals) truly can predict the movements of the stock market. As such, avoid falling into the trap of these common misconceptions.