[dropcap]I[/dropcap]nvesting is one of those things everyone hopes to do, but rarely get around to doing. Misconceptions about the basics of investing are quite common among people who are not professional financiers. These myths could actually be keeping you from investing today and growing your money. Read below to find out if you believe in any of the common investment myths:
Investing is No Better than Gambling
This is a fairly common misconception about investing. When people hear about traders “playing” the stock market, they assume it is similar to placing bets in a casino. This is not how professional investing works. Investors carefully research assets and companies before paying for stocks or bonds. The professionals read analysis reports, follow industry trends, and keep up with the latest news. It’s a far cry from placing a bet and hoping luck would win out. Some people may buy stock or assets on a whim without really doing their research. In this sense, they are gambling rather than investing, but this is not how professional investors typically work. Even high-risk forms of investing, such as day trading with penny stocks, require careful assessments to do it right. Financiers may take risks, but only after understanding the level of risk, which is very unlike gambling. It’s all about knowing which penny stocks to watch, and in turn, knowing which penny stocks to buy.
Starting to Invest Require a Lot of Money
It may seem as if being an investor requires you to be rich enough to part with hefty capital. After all, investors we hear of in the news, like Warren Buffet, are millionaires. Casual investing in real life doesn’t actually require a person to be wealthy. Technically, you can start investing with even a dollar. It’s possible to invest small amounts of money and expect returns. If you put your money in a savings account, that’s a form of investment too. So is buying pink sheet stocks for five bucks. There are smaller scale investments newbies can try with capital amounting to less than $100. So, don’t let lack of money deter you from making investments. What matters is that you invest wisely.
Owning a Home is an Investment
Are you furiously paying off your mortgage because you consider your home to be an investment? This is a widespread sentiment that is not necessarily true. In financial terms, home values can vary within a span of decades. So your home is only a worthy investment if it’s valued higher than what you paid for it in total, which includes mortgage interest rates. New retirees face this dilemma all the time. Those who want to retire comfortably hope to downsize and move on but are not able to afford it. Therefore, don’t consider owning a home as an investment on its own. A house can be an investment if you rent out parts of it. If you are actually earning money with tenants or leases, then that is a classic definition of a real estate investment. If you are just paying off the mortgage on the house, you are only trying to acquire the basic right to shelter.
In conclusion, yes, investments can be risky and require capital. But you don’t need millions to actually start investing. You can assess the risk you want to take on in advance. Therefore, learn more about investing to secure your future finances without relying entirely on a 401(k).
Ryan Kh is an experienced blogger, digital content, and social marketer. He is founder of Catalyst For Business and contributor to search giants like Yahoo Finance, MSN. He is passionate on covering topics like big data, business intelligence, startups and entrepreneurship. Connect with him on Twitter @ryankhgb.
