6 Common Investment Myths that people still believe


Investment is an Art!!Learning this art needs skills, patience, emotional balance & a lot more.

Limitless articles, investment books & a google search is all you need to learn about investing - believe me there has never been a better & an easy way to master Investment Planning.

Unfortunately, there has also been an overflow of misinformation which has caused a Confused Investor Syndrome!! Not all articles or blogs spread investor awareness. Well, I'm not bragging Mutual Funds Wiki has got everything spot on - Readers are the best Judge!!

Here are a few misconceptions among the investor community, which needs serious reconsideration -

Stock Market is for Gamblers

Yes, most of us would have heard this from people around us. Many investors get into stock market with zero knowledge and bail losses, which is the reason for such statements. There are only 2 aspects which define whether you'll make profit or loss. Yes, i'm talking about Greed & Fear - The emotions that drive equity markets.

You need to be frugal while investing in stocks, search for the ones which are cheap & obviously has a good management. You need to ensure your portfolio, irrespective if it is a stock or a mutual fund needs to be well diversified - How to diversify your mutual fund portfolio?

Financial Advisor will take care of my portfolio

Well, yes it is a good idea to hire a financial advisor. But does that mean you can breathe easy & the advisor will do the rest. No, you need to be involved in the process.

Eventually, it is your money. Set the expectations right, discuss your investment horizon & how much risk you are willing to take. Discuss all investment strategies as to what can be done to minimize the losses in case of a bear market. Same strategy does not work for every individual. Ensure you are meeting your advisor regularly to discuss on the aspects of your financial planning.

You also need to be well versed as to how you can shuffle your portfolio when the equity markets are volatile - How can you survive a Volatile Equity Market? Educating yourself is very important, which empowers you to put across your ideas to the advisor.

My money is growing safely in a fixed deposit - Why should i take any Risk?

Really? You believe so? Read On!!

Fixed deposit rates have fallen to a multi year low, with many banks offering 6.5-7.5% deposit rates. 

While calculating returns from a fixed or recurring deposit - you need to understand the post taxation returns. If your bank is offering you 7% & you fall under the tax slab of 30%, you are eventually earning only 4.9% out of your deposits. Now is that a healthy figure?

Obviously NO!!If you look at inflation rate figures, it is around the same range of 5%. Which basically means you money is not growing - it is static. Last year if you could purchase an item at Rs. 100, this year you need shell out Rs. 105 for the same. Hence, the value of Rs. 100 last year has depreciated, which is the reason you need to identify financial instruments.

Investment requires a lot of money

Did you hear that Warren Buffett started investing with only few pennies. And look where is he today - one of the greatest Wall Street investor. You don't need to put in Rs. 10 lakh or a crore into investment instruments. 

I'm sure you would have heard of SIP - Systematic Investment Plan. Yes, this mode of investment ensures you pump in money at specific intervals. It obviously has a whole lot of benefits - gives you flexibility, minimize investment risks & others. Here are the 360 degree benefits of SIP - The magical recipe for financial success

My Investment has done well in the past, My Future is Secure!

Ahh..Think Again!!If you see 100 year history of stock market investing, there has never ever been a time where the past returns have guaranteed a promising future.

What usually happens in a short term, traders attempt to chase the hottest stocks, which leads the stock price getting to unreasonable valuations & a bubble is created. What investors need to care about is the price at which they are buying & the long term potential of the business. A real investor needs to stay patient through the short term market noise.

If you don't believe so, read here for the complete analysis from a mutual fund perspective - Chasing past returns in a mutual fund might be bad idea

Gold is the best Investment

Gold investments are relatively safe but unfortunately, there are negligible evidences in the history which suggests that the metal is a good long term investments. If you look at last 20 years data, gold managed to provide only 5% annual returns. While BitCoin had no intrinsic value, Gold doesn't either. Like any asset, gold is what people are ready to pay for it.

Still have any questions or feedback on the article, don't forget to share it in the comments section below.


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