Five Myths about Investing

If you think back to our discussion on the compounding interest page, you might remember the amazing power of increasing your savings interest rate by just a couple of points. Over your lifetime, gaining even a few points can mean thousands of dollars in your pocket. Investing is how we will begin to create those returns. Unfortunately, too many people hold off on investing for various reasons. Listed below are 5 myths that keep people from taking that first step, and how to overcome them.

  1. MYTH: You need a bunch of money.  This is a very common myth. I hear people all the time who say something like, “I want to invest, but I don\’t have enough money”. Or, “The rich get richer because they have money to invest”. But the truth is, investing doesn’t require very much money up front. My first stock purchase was only $25. I lost most of it, but with what I learned, I then invested more and had $1,000 in less than 2 years.
  2. MYTH: You will get rich quick.  As much as I want to convince you that investing is a powerful tool, I also don’t want to over-hype it. The amazing return I mentioned above is rare, and sometimes you will lose money. Any investment system that promises to make you rich quickly is probably a scam.  But with proper research, and a lot of practice, you can make a comfortable return on your investments.
  3. MYTH: Investing is complicated.  This one does have a certain degree of truth to it. While it is true that researching investments can be hard sometimes, you will get better with practice. And as for the actual process of going online to buy stocks or bonds, its really not much different than ordering anything else online. If you have ever made a purchase online, you can buy stocks or bonds.
  4. MYTH: Investing is like gambling.  Investing is not the same as gambling. When you gamble, you are throwing money into a pot and hoping for good luck. Even if you win a few times, most gamblers lose over the long run. Investing is different. With the proper knowledge and information at your disposal, you can consistently make a profit in the long run, even if you lose money once in a while.
  5. MYTH: Investing is time-consuming.  Again, there is some truth to this, but it depends on your investing style and the goals you want to achieve. If you want to be a full time stock trader or investor, you can make a full time job out of researching stocks and other investments. But if you want to buy and hold stocks and bonds for retirement, it takes no more than a few hours per month. Considering the average American watches four hours of TV per day, that isn’t very much.

Those are the big 5 myths that hold people back. If you can get over those myths, you will be ready to make your first move into the world of investing.