Busting the 14 stock market myths.
Remember the last time when you discussed with someone your idea of investing in stocks? Were you demotivated? This is because there is lot of negation and pessimism when people hear about the term ‘Share market’. Everyone has their own bunch of stories to tell about the markets whether they really know the stock market basics and know how to invest in share market is all secondary. 90% of the things which they tell is in supposition and far from reality. Being skeptical about the markets they don’t invest in the markets and don’t let other invest in the share market. This blog ‘Busting the 14 Stock Market Myths’ is written with an aim to bust all the common and major myths which are in the mind of a common man. After reading this blog you will get a good idea of what is the reality pertaining to markets and what is happening at the ground zero. So getting into the topic, here are the common stock market myths which everyone needs to get clear about.
Majority of the people in India think that investing in stock market is as good as gambling and the ’luck factor’ plays a very important role in making money in stock market. THIS IS THE BIGGEST MYTH and you need to get out of this mentality. When you invest in stocks without following any base of analysis and just with your gut feeling then that would be called as gambling. But reading charts and analyzing them to take a call is not gambling. The potential risk should not exceed the expected returns. If a person follows all this then it would not be fair to say that he is gambling. It can be said that investing in stock market is his business.
If experts tell you to invest, you should invest.
Majority of the beginners or amateurs blindly follow the stock market advice from the experts featured on finance related TV channels, brokers, SMS, friends and relatives who are trading and the news related to a particular company. As far as investing in stock market in concerned it is very much important to take calls after analysis and not blindly following others. The success ratio of these types of trades is very less and eventually you will finish up losing money in the markets.
Never set stoploss.
Many so called experts in stock trading would suggest you to trade without setting stoploss. This would prove to be very disastrous for you. By not setting your stoploss you expect to recover your investments in case of a downfall in the prices. This is a very wrong practice and this would land you in some serious troubles. Trading with a stoploss is the best practice.
Only people of young age can invest in shares.
As the saying goes ‘It’s better late than never’. Age is not a factor to invest in share market. Even if you are getting old you will need money to survive and investing in stock market would be one of the best choices to make to earn extra income after retirement.
Getting into debts can be very deadly and it is always good to invest the money you have and not to get in debts to invest in share market. No one can predict the market sentiments and movements so playing with borrowed money can result into heartache.
Only invest in the best industry.
As Warren Buffer once said “Never store all your eggs in one basket” diversifying your investment is important so make yourself financially secure and moreover minimize your risk. This can be very helpful for making money in stocks.
Higher risk means higher returns.
This is one of the strangest stock market myths which have got many people in despair. According to markets it is never that higher risk means higher returns. To get higher returns you need to invest in stocks after thorough study of the fundamentals. Moreover investing smartly can fetch you more returns.
Investing in penny stocks can make you rich overnight.
The main reason for this perception is because penny stocks are traded at a very cheap price usually below the price of Rs. 10. Investing in these stocks would not need much of capital and there are some cases that the stocks grew over 100% within a short period of time. But penny stocks are highly risky; chances of losses are even higher. The best case to portray the risk involved in investing in penny stocks is of SMS Techsoft (India), and Nu-Tech Corporation services, these stocks fell over 76% and 66% in the past 10 years and there is no sign of recovery.
If FII or DII buy certain stocks it is bound to be the best choice.
As mentioned earlier the market can take the stock in any direction. Tracking FII’s movement for investing in stock market can sometimes be risky. If FII is facing liquidity crush they may sell the stocks and exit from trade beforehand. The one who follows FII for investment would miss out an opportunity to earn. A classic example is of TATAPOWER, FII increased their stake from 24.5% to 26.03% but the stocks underperformed and the prices dropped from 95.8 to 79.45.
Having less knowledge is sufficient for investing.
The once who gamble in markets do not have any knowledge about the market, and they think that less knowledge is sufficient to invest in share market and end up being broke. Learning the analysis and taking decisions based on data can minimize the chances of risk and losses. So before investing in stocks always learn stock trading and analysis and practice on paper before investing on real-time basis.
As a rule of thumb the people who want to get rich quicker, lose their money fast in share market. Patience and persistence is the key to success in stock trading. Investing needs discipline and always remember ‘Good things take time’.
Large cap stocks are always the best.
It is one of the most common stock market myths that investing in large cap stock will guarantee you the best returns, hence buy and forget it. This is not always correct. We need to review our portfolio consistently, instead of predicting, try following the market. Remember: Never get married to a stock
High capital investment is necessary.
This myth has stopped many people from investing in the stock market. Initially it is advised to start investing with 10,000 Rs and to increase the investment amount gradually once you get used to stock trading. This would help you minimize the chances of losing money in the markets. It is always advised to start small.
Only experts can make money in the markets.
Always remember that ‘every expert was once a beginner’ and this myths has to be busted. Anyone can start investing in the share market provided he knows how to invest in share market and has undergone a professional training session to learn stock trading and analysis.
To conclude and to bust all the stock market myths we can say that investing in share market is not a gamble and it is a business. Investing smart and investing from a early age can make you financially secure in the long run. Before investing in stocks one has to get trained in stock analysis to invest better and to make money in stock market. If you are willing to learn stock trading and analysis from the experts then EQSIS can help you.
Can you contribute more? Or want to share your experience? Share it in the comments section below.