Top 5 Equity investment Myths, that one must overcome

Top 5 equity investment myths that must overcome 1 Top 5 Equity investment Myths, that one must overcomeInvesting myths have been sustaining throughout the years despite there is a wide range of sources to learn about the share markets and the stocks. Either by history or by the practices of inexperienced investors. Nearly all the investors would have been a victim of such myths about investing, while some of them are still victimized every day. Rather than being a victim of investing myths, it is crucial for investors to have a precisive understanding of stocks and trading. This article brings out some of those myths that every investor must prove to be false.

Key elements

  • Investing and Gambling are two different ideas that will never collide.
  • The stock markets are not a rich people arena.
  • Buying a stock just because of its fallen market price will not yield any profit, it is important to focus on buying a share at a reasonable price.
  • If a company provides a valuable product or service and is running by well-versed managers, the price of that company will likely rise over the long term.
  • Having not much knowledge about investing will give nothing but a devastating result.

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Investing in stocks regard as the same as Gambling

This ideology has drifted many people out of the stock market. Investing in stock intrinsically varies from gambling, as the very nature of gambling is, to take money from the loser to offer it to the winner. Unlike gambling, investing in stocks not only cherishes the people involved in it but the entire wealth of the economy. To understand this one must evaluate what it means to buy a stock. One share of common stock of a company can entitle the shareholder to claim a fraction of the profit generated by the business, representing the partial ownership of the shareholder in the company. Many a time investors forget that every share they own represents their partial ownership of the company and often treat the shares as a medium to trade with.

Most of the time the stock prices fluctuate, when the investors continuously try to gain access to the profits that are there for the shareholders. The future earnings of a company are constantly changing, just like the prospect for business conditions. As you see, estimating a company’s value is as complex as it seems to be. Even that short-term price movement appears to be random because of the innumerable variables involved. Nevertheless,  over the long term, a company has to be worth the current value of the profits it will earn. When it comes to the short term, with the presumptions of future earning, a company can survive without profits, but no company can make a fool of the investors repeatedly, as the company’s stock price will expose the actual value in one day or another. Gambling on the other hand creates no value, therefore it will be utter foolishness to compare investing and gambling.

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The stock market is a club that exists just for brokers and rich people

Most of the advisors in the market declare their ability to call every turn of the market. Anyhow, as good as every study done on this topic has proved these claims to be untrue, as most f these market soothsayers are infamously flawed. Moreover, the market has become much more approachable to the public than ever before with the help of the internet. Individuals are using the data and research tools that were once used entirely by brokerages. Besides, the discount brokerages and the Robo-advisors let the investors access the market with the smallest amount of investment.

Fallen prices will go higher in the end

There’s a Wall Street saying that reads, “Those who try to catch a falling knife, only get hurt.” Nothing is as destructive as believing this particular myth when the dabbling investors think that a stock trading closer to a 52-week low can be a good buy. Investing and trading are different things and the price is the sole part of the investing equation. Investors should aim at buying growth companies at an appropriate price. Buying a company by evaluating nothing but its current market price that has fallen will earn nothing. Investing should not be done based on the current value of the stocks, like buying high-quality companies that are underestimated by the market. 

Stocks that go up will come down

The stock market is probably the only place where the laws of physics fail, as you see none of the gravity can pull down the stocks back to even. Even at the times, when a stock price is going through corrections, it is likely for the prices to rise over the long term in the company is in the grip of proficient managers and provides quality products or services. It is unfair to say that the stocks never experience any correction, the point is that the stock price is nothing but a mere reflection of the company.

A little knowledge is better than not having any knowledge

Knowing something or nothing is not better than anything when it comes to the stock market. It is pivotal for individual investors to have a clear understanding of when and where to invest their money. It is always the investors who do homework are the one that flourishes in the market. Investors who cannot afford anytime on research must think about hiring the service of an advisor. It is not wise to invest in anything that you are not fully aware of, to be honest, it is a deliberate waste of the money that you are investing.

A partially informed investor is more or less like a partially educated surgeon, the mistake caused by such people can be irreversible and can deeply affect their financial stability.

1 Top 5 Equity investment Myths, that one must overcome

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