Like everything else that involves money-making, stock market investing is fraught with myths. “You need to be rich,” or “Investing is gambling,” are two of the most common falsehoods that get bandied about by the uninformed. For new investors who want to know the truth about the stock market, the following myths are the ones you’re most likely to hear. Don’t let those negative attitudes deter you from investing in the stock market. Here are a few of the most pernicious myths, followed by the truth of the matter:
You’ll Lose Everything
As the old song says, “Paranoia strikes deep. Into your life it will creep.” Some people continue to perpetuate this myth because, apparently, they fear putting even one dime of their money at risk. Live all other forms of investing, the stock market involves risk.
Premarket Trading is Borderline Illegal
Premarket trading is completely legal and is a popular way for certain investors to take advantage of pricing gaps that tend to occur in the few hours before the big exchanges open for business. Not every broker offers access to premarket trading but many do, and while there are risks involved, there are also opportunities, and it is as legal as any other form of stock trading.
Only Wealthy People Can Afford to Invest in Stocks
Anyone with a few extra dollars can invest in the stock market. Old movies and Depression-era literature painted the stock market as a mysterious gambling parlor for the ultra-wealthy. Nothing could be further from the truth. Today, the majority of working people own stock through investment plans with their employers, on their own or in pension funds. Stock investing is for anyone who wants to profit from owning a piece of a company.
The Stock Market is a Form of Legalized Gambling
It’s legal but not gambling. Gambling outcomes are random while investing outcomes can often be predicted with pretty good accuracy, especially in the short term. Additionally, gambling does not create wealth or produce anything of value. When you invest in a company, you’re actually creating something good and helping the organization accomplish its mission.
You Need a Broker’s Advice
Depending on your method of investing, you might need a broker to place orders for you, but you certainly don’t need one for advice about what stocks to buy. Many so-called “discount” brokerage houses don’t offer advice even if you wanted it. Others will give you advice for a fee there’s never a requirement that you ask for or take advice from a broker.
Commissions Will Eat All Your Profits
This myth is very old and for that reason alone it’s highly inaccurate. Nowadays, there are multiple brokerages, both online and off, that offer very low trading commissions. Decades ago, commissions were quite high, but even then, the charges weren’t high enough to negate smart investment profits.
What’s It All Mean?
Some of the above myths are based on nothing more than fear of the unknown. It’s always a good idea to investigate for yourself before risking money but that doesn’t mean you have to crawl into a shell and hide your cash in the mattress. So, go forth. Research, study, educate yourself and invest with confidence.