For novice investors, the fear of “not knowing” can be quite intimidating – and it’s completely understandable. Seeing the multitudes of figures, rules, and strategies, anyone can be overwhelmed.
The fact of the matter is, before entering the investment world, many people don’t even know the difference between a bond and a stock.
However, the more time you spend reading and researching to increase your knowledge base, the more confident you become. You eventually realize that investing isn’t all that difficult, really.
As with everything else, there’s plenty of buzz and rubbish surrounding the investment world, and you need to learn how to tune it out. Once you learn to navigate through the unnecessary parts of it, the rest of your journey should come out much smoother.
With that in mind, today, we’re breaking down some of the top myths associated with investing to make your vision a bit clearer.
1. Only the Rich Can Invest
When you’re financially independent, your first goal should be to build an emergency fund. This should amount to about six months to a year worth of essentials, including food, housing, and other supplies.
Once that’s out of the way, there’s no reason that you can’t start investing. The point of investing is to grow your wealth, and you can start with even $100. If your goal is to become a millionaire, you need to give yourself a long enough window for your investment to reap that kind of profit. The sooner you start, the sooner you achieve your goal.
2. Building a Portfolio Takes Lots of Time and Effort
Yes, handpicking stocks might require your time and effort because researching every last detail is essential in that case. However, a viable alternative to going through the excruciating lengths of picking stocks for yourself is investing in the S&P 500 index funds. Since this index aims to match the performance of the 500 largest traded public companies, you won’t have to spend a lot of time researching.
3. You Can Only Invest in Stocks
The reality is quite the opposite, actually. If you tend to stick with stocks only, you have lesser chances of growing your wealth. Confused? You might have heard that diversification is important for your portfolio.
This basically means owning different assets as well, including bonds and REITs. While bonds don’t acquire profit as quickly as stocks do, they can be a steady and promising addition to your portfolio. And, they’re exempt from federal taxes, too. REITs, or real estate investment trusts, can also help you reap large profits, especially since they don’t generally follow the stock market pattern.
The internet has way too much unnecessary and often misleading information. As a novice investor, always opt to get your information from reliable sources to avoid making any errors that might mess up your investment journey.