Investing Myths That May Be Costing You Money
August 19, 2015
When it comes to investing, there are myths out there, we have all heard them. These myths can often times be very costly for you and can lead you to take too much risk or too little or maybe even avoid investing at all. Below are some common myths about investing and then we give you the truth.
The Myth: Investing is basically just gambling.
Although there may be similarities between the stock market and casinos, there are drastic differences as well. For instance, the odds. The odds in Vegas are always against you. You may lose money on a specific stock but if you have a diversified portfolio, over time it may help mitigate your losses. In gambling the odds are not in your favor. If you invest in solid companies and invest for the long term that can be to your true financial benefit.
The Myth: There are “secrets” to successful investing that most people don’t know.
The secret to investing successfully is not secret. Work with someone you trust and diversify your portfolio to reflect your goals and situation as an investor. Invest for the long term. It’s patience. It’s having someone help you and be a partner to make smart decisions.
The Myth: The older I get, the less risk I can take.
Research has found that instead of getting more conservative as you near retirement, you may want to consider getting more aggressive. This may help reduce the chances of running out of money in retirement. This approach is known as the “rising equity glide path” by researcher Wade Pfau, professor of retirement income at The American College*. It’s not that all of a sudden you retire and want to be completely conservative with your money. You want to have a diversified portfolio and one that works to achieve your goals.
The Myth: If there’s a lot of hype about a company, it’s time to buy stock in it.
Once you start hearing about a hot company, it may already be too late. Even if you get in on a hot “initial public offering” or IPO, you are not getting in on the ground floor. Before going public, a typical private company has several rounds of financing by individuals or companies. These investors, venture capitalists and private equity firms are the ones who likely get the most value for their investment.
The Myth: You need a lot of money to invest.
You do not need a large amount of money to start. However, you do need to be able to leave the money alone that you invest. Workplace retirement plans allow you to start investing immediately with as little as 1 percent of your pay. With an IRA, you can start with any amount, however most investments do have a minimum to buy into, typically around $1000. I believe you won’t have a lot of money until you start investing. This is where we can help. Call our office at 763-231-9510 to meet with one of our financial advisors for a free consultation to see if we can help you achieve your goals.
*Researcher Wade Pfau and the “rising equity glide path” do not necessarily reflect the views of LPL Financial.
Investing involves risk including loss of principal. Diversification does not assure success or protect against loss. All performance referenced is historical and is no guarantee of future results. This material was created for educational and informational purposes only and is not intended as investment advice. You should discuss your specific needs with a qualified professional.