If you’ve heard anything about the stock market in the 21st century, you may have run across one or more of these common myths surrounding the market. The Internet is full of information, but it is also full of misinformation and falsehoods that are read and spread around bars, golf courses, and office water coolers and break rooms all over the country. Being able to identify these myths will help you avoid losing money in the stock market and to make better investment decisions.
It’s Easy - While the stock market is indeed not too difficult for those who apply themselves and get the necessary knowledge, it is by no means for those people not willing to take the time needed to learn the rules (written and unwritten) of the stock market. This can take a lot of time. Also, experience is needed in studying trends and learning when to buy and sell to make the most profit. While it’s not overly difficult, it’s by no means “easy money.”
It’s Too Complicated - On the other hand, there are those who say the stock market is too complex and complicated to be a steady investment in the long term. While that may be true for those not willing to commit the time and energy needed to become familiar with the stock market and the way it works, it’s not true for everyone. In fact, many people have been able to teach themselves - or learn from others - how to expertly maneuver the stock market for a profit.
It’s Elitist - While this may have been true at one time - especially when it comes to women and minorities - today, the stock market is as fair as any other industry in America. That is to say that it’s not elitist at all and offers many different types of people the opportunity to make money.
It’s Tanking / Recovering - If you study the stock market for any length of time, you are going to see that there are periods of growth and periods of decline. This is the way the market works. Worrying too much that the trends are going to keep going one way is pretty much useless. The longer the market moves in one direction - a bull or bear market - the higher the chance that it’s going to switch around and head in the other direction. This has been shown time and time again since the market has been recorded accurately and studied over long periods of time.
You Need Millions - While it would be nice, of course, to have millions of US dollars at your disposal to invest in the stock market, you do not need this much money. Of course, you want to make sure that you’re not spending your rent money to invest in stocks for short term gains, but in general most people with a few thousand dollars or more may be in a good spot to invest some of that money in the stock market.
More Risks, More Rewards - While this is certainly true in some cases, it’s not a hard and fast rule by any means. Some amateur investors take huge, unnecessary risks thinking this is the best way to big riches. In most cases, it ends up being a one way ticket to losing everything on the stock market. The wise investor will occasionally take risks, but there should always be something more steady in play to balance out any risks you do take on the market.
What Goes Up Must Come Down - The laws of physics do not apply to the stock market. This is a very important lesson. All stocks that go up will not come back down - slowly or quickly. In some cases, stocks will rise and stay there for a long, long time. There are no guarantees in the stock market - especially when it comes to how high a stock can rise without falling.
Falling Stocks Will Rise After 52 Weeks - This may happen in some cases - or maybe even sooner - but nothing is guaranteed in the stock market. So, just because a stock has been going down steadily over the course of a year does not mean it will suddenly rebound and come back. This is a common way for many people to lose money on a stock that’s not going to make a comeback anytime soon. Generally, investors view a stock on its fundamentals and future prospects. If the company is not fundamentally sound it may never rebound.
A Little Knowledge Goes a Long Way - In fact, someone with just a little knowledge trying to invest in the stock market may find that a little knowledge is in fact dangerous when it comes to trading on the modern market. With a global economy and many other factors at play, if you don’t know all the rules - written and unwritten - you’re going to want to make sure you know as much as possible so that you can decrease the chances of losing money. Do your homework on companies. Read their financial reports and press releases and understand the markets they play in so you can better understand their prospects for growth and the stock’s price appreciation potential.
There are other myths surrounding the stock market, but these should be enough to get you thinking about whether or not everything you hear about investing in the stock market is true or not. With so much information available these days, it’s more important than ever to have a gatekeeper or editor of sorts to make sure you’re only getting the very best information available. If you decide to trade stocks, get an online brokerage account that gives you access to research data and company information so you can always do your homework before you invest.
The truth is that the stock market is a great way to make money in the short term and the long term. If you know what you are doing, you can make quite a return with your money. Avoiding the myths of the stock market is one important way to make sure you do the best that you can do.
You can read more about investing in microcap stocks at www.otcpicks.com, and use our online tools to help you do your homework so you can make more intelligent and informed investment decisions.