There are plenty of misconceptions and stereotypes out there that can turn someone away from wanting to invest. But the truth is, falling for those myths and failing to invest can cost you. Don’t lose precious time or your money by falling for these common investing myths. Here below I am clarifying some of the most popular misconceptions that people have.
- You have to be an expert to start investing.
Contrary to popular belief, you don’t have to be an expert to start investing. So many of us fail to get started managing our money because we’re intimidated about the financial jargons or don’t know where to start. Fear of unknown or not being able to trust anyone could also be one of the reasons for not taking the step towards investments. Actually all you need is time and willingness to learn. Invest some time in educating yourself about investments and what you are investing into. Trust me it’s not rocket science.
- You need to have a lot of money to invest
Before I took the time to learn about investing, I used to think it was only beneficial to older people who were already rich. That definitely wasn’t me, so I had no business trying to invest right? Wrong. Falling for this common myth can easily scare you away from investing early with what you have and having the opportunity to watch your money grow over the years. It’s true that you need money in order to invest, but probably not as much as you think. You can start investments with even Rs. 1000 a month! However, what’s more important is that you show discipline and do this consistently.
- Investing is too risky, almost like gambling.
No one wants to lose money when investing, but much like a casino, the option of losing money does exist. Unlike gambling, with investing the odds are not against you as the market is bound to average an annual return each year unlike those slot machines you can lose all of your money on. When you think about it, everything in life involves risk. You wouldn’t start riding a bike or driving a car if you didn’t know how.
In order to decrease the risk associated with investing, learn about investing and learn about your options. Learn about mutual funds and how to diversify your portfolio. Diversification means spreading your money out among different kinds of investments. Some months may take a harder hit than others but a diversified portfolio that you continue to invest in will certainly earn you more money as time goes on. Actually, not investing is the bigger risk!
- Investing means Equity
People often associate Investing with Equity, but this is not entirely true. Mutual Funds invest in a variety of instruments ranging from equity to debt. Within debt they may invest in debt instruments that mature in a day (also known as Money Market Instruments) to those that mature in 1 or even 10 years. Moreover, Investing takes on many different forms — from contributing to a tax relief to buying stocks and investing in mutual funds, Gold, real estate, bonds etc. It’s up to you to decide where to put your money based on your goal, risk taking ability, time horizon of your investment.
- You will get rich quick.
Paradoxical isn’t it? On the one hand, we have all kinds of fears that prevent us from investing and yet when we start investing we believe we will get rich overnight. As much as I want to convince you that investing is a powerful tool, I also don’t want to over-hype it. Any investment system that promises to make you rich quickly is probably a scam. Investing is like a long marathon and not a short sprint. With proper research, realistic expectations and a lot of practice, you can make a comfortable return on your investments.
Get started and Happy Investing!