There is an awful lot of bad advice out there when it comes to managing your money or investing in stock markets.
Like rumours, these myths get told and retold as if they were true. They spread like wildfire even though they are flat out wrong.
Some of these myths are just plain dumb, some are deceptive…but almost all are downright dangerous!
It’s time you know what these dangerous myths are, so that you are in a better position to side-step them.
So let’s get started right here, right now!
1. This time it’s different.
You heard it last time in January 2008, didn’t you?
2. If it’s on CNBC, it must be right.
CNBC’s business is not to help you make money. It’s (only) to sell advertising.
3. Let me buy before the stock moves even higher.
Greed isn’t good in investing. It never was.
4. I won’t sell till I get my capital back.
It’s your ego that’s doing the talking here. There’s no point is plugging holes in a leaky boat.
5. I’m sure this is a turnaround story, so I’m willing to put all my money on it.
Turnarounds seldom turn around.
6. This stock is already down 90%! How much more can it fall?
A stock that dropped from Rs 100 to Rs 5 first fell 90%, and then another 50%.
7. In the long term, everyone is dead.
That’s true, but if you play for the short term, you can die of shock even earlier.
8. You need to be a genius to make money from stock markets.
Of course, you don’t need to be a genius to make money from stock markets.
9. I hate stocks. I’m fine with the safety of bonds.
With inflation running at 10%, and bond returns at 8-9%, you know where you’ll end up in the long term, don’t you?
10. I’m too young to invest.
What, no one ever told you about the power of compounding?
11. I’m too old to invest.
It’s always better late than never. Even if you’re old enough, you’re still alive and thus need more and more money to maintain your living standard in the future.
12. I’m already earning enough.
So you want to continue to work forever for money? Why not let your money also work for you?
13. My broker is my friend. He knows what’s right for me.
$#&%!@
14. Investing the way fund managers do is the smartest thing to do for small investors.
Almost 80% of mutual fund schemes have performed poorly over the past five years.
15. IPO = Fast money.
Think Reliance Power, DLF, and SKS Microfinance.
16. Stocks are always best for the long term.
Ask the Americans who’ve earned near zero returns during 2000-2010. Stocks are best for the long term ‘only’ when you buy them at the right prices.
17. Investing is risky.
Not investing is the biggest risk.
18. I’m sure this stock will double. Let me borrow some money to buy more of it.
Debt can kill. Ask the Americans and the Europeans.
19. Why save now? The future will take care of itself.
Look at your son or daughter and try saying this again.
20. No one can pick the right stocks effectively.
If you have some brains, some time, and are willing to put in the effort, you can do it.
21. It is skill with numbers that makes a money expert.
Skill with numbers makes you overconfident. And overconfidence and investing have never been good companions.
22. You can never go wrong when you invest like others.
The problem with the rat race is that even if you win, you’re still a rat!
23. Stock market is a casino.
If you think the stock market is a casino, you will be a loser in the long run. And if you don’t, you’ll be a winner. It’s entirely up to you.
24. It’s easy to time the market.
When did you do it right the last time?
25. Large cap stocks = Safe stocks.
Satyam…anyone?
26. I’ll start saving and investing when I have enough money.
Have you ever thought you had enough money?
27. High risk = High return.
Good stocks = Low risk = High return. Bad stocks = High risk = Permanent loss of capital.
28. 99% of investors don’t read annual reports? So why should I?
Now you know why 99% of investors don’t succeed.
29. To grow my wealth, I have to diversify.
Concentrate (in a few investments) to grow your wealth. Diversify to preserve it.
30. Speculation is fun. I made a lot of money from it over the past few months.
Smoking is fun for those who do it. But it kills if you do it for long.
Now what to do?
It’s good you asked this!
You see, success in a free country like ours is simple. Get an education, work hard, and learn to save and invest wisely. Anyone can do it. And so can you. But what you really need to succeed as an investor is your own independent thinking.
Remember, you alone are the most capable person alive to manage your money. It’s high time you start believing this.
Rather than support the financial services industry – with its lies, experts, greedy brokers and financial advisors – that runs its nailed shoes over you – the small investor – it’s high time you start making your own investment decisions, and take control of your financial destiny.
Don’t worry if the magnitude of the effort bothers you. As the famous Irish poet Oscar Wilde once said, “The final mystery is oneself.”
So, unravel the mystery that is ‘you’. Be self-aware. Know about your strengths and weaknesses. Know whether you are willing to take the risk of investing in the stock markets. And if you know all this, you’ll think, you’ll invest, and you’ll win.
And of course, you’ll have help at hand in the form of Safal Niveshak…all the way.
Happy and safe investing!
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Vishal,
Couple of callouts
1)Point 14- Blindly copying fund managers picks would be a recipe for disaster, but the subsequent sentence can put off investors from mutual funds. Careful selection of a handful of reasonably performing consistent funds ( read:not absolute toppers every time) would do wonders for an investors wealth if held for long enough time periods
2) Point 16 – Regarding the “Lost Decade” of American equity investing, the point you have made would be applicable only to the investors who invested a lumpsum at the absolute top of an overheated bull market and did not make any further investments during the following 10 years. The vast majority of US equity investors tend to invest via 401(k)s and other retirement/pension plans which makes monthly investments via systematic payroll deductions,enabling investors to catch the highs and lows of the market.And the near zero returns only refer to a point to point return from 2000-2010. People who kept on steadily investing, especially salaried investors, have had much better returns if they had invested in index funds or active mutual funds.Only a small percentage had to suffer these “near-zero” returns.
A good I would say almost a near complete list.
I liked this “Be self-aware. Know about your strengths and weaknesses. Know whether you are willing to take the risk of investing in the stock markets. And if you know all this, you’ll think, you’ll invest, and you’ll win.”
Very reassuring.
Thank you.