Stock Market Myths that do not die

By -Baptiste Wicht

In this blog, we are sharing the stock market myths, that Baptiste Wicht wrote

For more details, please visit the website given below

1. The Stock Market always goes up

You have probably heard this often: You should invest in the stock market; it always goes up. This is a big fallacy.

It is true that the stock market historically went up on average. This means that over a long period of time, the stock market always went up. But there were many periods of time when the market went down more than 10%.

If you want to invest in the stock market, you must be prepared for big drops. On average, the stock market experiences a 10% decline at least once a year and a 20% drop about every four years. And you should be ready for a steep drop of 30% once a decade.

A very important example is the one from the Japanese stock market. In 1990, a huge speculative bubble burst on the Japanese stock market. For the next 20 years, the stock market has been going down. Until now, almost 30 years, it still has not recovered to the high of 1990.

2. Investing in the stock market is for the rich

Many people are not investing in the stock market because they believe this is only for the rich.

This is completely wrong. This is probably one of the oldest myths. You do not need much money to make money in the stock market. If you invest 100 USD or 1000 USD in the same portfolio, you will have the same returns in percentage. Of course, in absolute values, the more money you have, the more returns. But that is not preventing you from investing with little money.

Some mutual funds indeed have some minimum, like 5000 USD. But you can always use a broker and buy a single share of an Exchange Traded Fund (ETF) for a few hundred dollars. There is really no need to get rich before you invest in the stock. On the contrary, if you wait until you get rich before you invest, you may well never invest.

The best time to invest is now! You can invest in the stock market with little money!

3. Investing is gambling

Some people do not invest because it is too risky, like gambling.

It is true that if you invest in a single stock, you will have a very risky investment. If you invest in a good company, you still have better odds than playing against the house (gambling). But investing in some shady company could indeed be compared to gambling. But investing in the broader market is not that risky. Over the long term, you can have outstanding returns.

Of course, there is no guarantee, and no investment is risk-free. As mentioned in Myth #1, you can expect the stock market to drop by 30% at least once per decade. But you must be strong enough not to sell and wait for the next recovery. It may take a long time, of course. But this is all part of investing.

In the next series, we will learn more about myths.

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