The investment field comes with good and bad choices.
However, accessibility doesn’t translate to experience. As an investor, while using those apps is beneficial, the amounts you invest are a different story.
You should set a limit on how much you invest, regardless of whether you use those apps or not.
A lot of investing principles work similarly. Some facts cost you money, others cost you lost opportunities.
We’ll explain those below in the form of myths. Check them out, and upgrade your investment strategy!
Top 6 Investing Myths
Myth #1: Only retired people make stock market investments
The 401(k) is a well-known concept for many investors. It’s a retirement account that is employer-sponsored. Each 401(k) can be tweaked so that it matches an employees’ contributions.
Still, that doesn’t make it a prime investment channel.
Investors may have been maximizing those types of contributions for years. But what about other investment opportunities?
An investor’s remaining money can go into a saving or checking account. That surplus can perform well in a stock market environment.
However, some experts will give other advice. They’ll tell you it’s best to focus on your retirement account. They’ll reason that the profit is better when retirees have an after-tax brokerage account.
That’s not a bad idea. Checking and savings accounts are good for emergencies and daily common expenses. But, you need to invest your surplus money in stock markets. Investing that will give you a channel for exponential growth.
Myth number 2: You will get rich fast when you invest
Non-fungible tokens, meme stocks and crypto currencies are booming.
Even then, it might look like investors get millions overnight. But that’s still not true. Getting rich is difficult with good opportunities.
Getting rich is actually rare using assets such as crypto currency. The better way to do it is to have the appropriate allocation for assets. A good example is to have the best ratio between bonds and stocks. It gets even better when you have the discipline to maintain the long-term positions. Long-term positions are guarantees for future success.
Financial advisors recommend keeping the allocation risks at only 2%. For exceptional opportunities, assets risks should reach no more than 5%.
Speaking of financial advisers, keep them around. They will help you plan better. Advisors can be your guide to the smartest investment and economic planning. Their advice will help you stay on the right track.
Myth number 3: Your stock of allocation must be 100% – your current age
The rule where you subtract your current age from 100% is well known. It’s used by some to determine their current stock allocation.
It makes investing look easier. However, it’s not that effective. It simply doesn’t work in the changing circumstances of today. Many advisors see that this is impractical with an increasing lifespan.
Over time, this rule will make tracking inflation hard for average investors. Thus, they see that using 110 as a marker is better. It’ll help you get the right percentage for your portfolio.
That’s not a hard rule to follow though. Your circumstances might be different. For example an 80 year old might have $20 million while spending $200,000 per year. They may desire to leave something behind for family and children. If their cash flow is sufficient, then in that case, they can upgrade their investments share to 90% of their portfolio.
That said, a few other factors should be considered. Those would be risk tolerance, cash flow and the investment timespan.
Myth number 4: Best inflation hedge is gold
Many advisors see gold as a solid counter to inflation. Common opinion may dearly follow such advice. However, gold is not actually a good inflation hedge.
Gold has developed that reputation due to popular belief. Many investors see that the price of gold rises with the rise of prices. But the truth is different. History shows that gold tends to drop during inflationary periods.
Gold is only good if the US dollars begins to drop in value. The “weak” dollar is good for gold investors, where the dollar value weakens when inflation rises. However, rising interest rates also lower gold values, which tend to go up with rising inflation.
If you’d like to hold gold, then don’t do so in excess. 5% of your portfolio is plenty enough.
Myth number 5: You need to have 0 debts when you invest
Some experts see that having a good financial position before investing is crucial. Being debt free is preferred. But it is not a must to have 0% debts to start.
That aside, high interest rate debts should be paid off before starting to invest. This all comes down to knowing your current budget and your financial goals.
Myth number 6: Investors must always check their investments
Feverishly checking your accounts non-stop is unnecessary. That idea is wrong. Investors should think more about their financial goals and responsibilities over rising and falling numbers.
That feverish tracking also applies to news sources. Tracking excess investment news does more harm than good.
If that’s you, then it’s best to focus on direct savings over investments.
However, this does not mean you should not check your investments at all. Simply keep track of your money every once in a while.