Are These Investing Myths Blocking Your Growth?
Unless you have spent the past 10 years camping under a rock, you’ve probably heard that making your money work for you through investing is the best way to get ahead financially. Your main roadblock? Every time the idea pops up, your ever-cautious mind goes haywire. Despite having heard all sorts of empowering advice, something inside you still gets uncomfortable with the idea of entrusting your money to “Wall Street”. If this sounds familiar, your strong reaction may have its source in a series of investing myths that, to this day, still scare people away. Ready to figure out how to bring down the myths once and for all?
The second time I acknowledged out loud my intention to explore the world of investing a little bit deeper, I was hanging out with my dad in the kitchen. When the “confession” came out, all I got was an excited, but puzzled look. “You know no one in our family has done that, right?”, my dad said casually. I stared back. That was my first time hearing that story so I pressed for more information. What I got in return was a story that opened my eyes to our collective money history. No one in the family had ever invested before, my dad initially felt some resistance to the idea. After a long and honest convo, he ended up supporting the idea but encouraged me to become as knowledgeable as possible. And that’s what I did.
While my dad’s initial resistance may sound like yet another family story (one that is far too common, I would add), it’s anything but. If you were raised in a culture and/or family environment where no one openly talked about money and personal finances, you might have heard a couple of stories just like mine. However, they might not have ended on a positive note because, let’s admit it, when it comes to complex money topics (investing is a prime example), it’s so, so common to receive tons of pushback. At this point, you’ve probably heard it all: investing is a complex and risky affair, thus attempting to get a bang for your buck is sometimes perceived as greedy and, in the most extreme cases, even morally dubious. In other words: a surefire way to strip yourself of your precious peace of mind.
With such strong views prancing around, all sorts of misguided beliefs manage to find a way into our heads and blend in —to the point where distinguishing the wheat from the chaff starts to feel like an impossible quest. And thus, without even realizing it, we become ensnared in a web of strong opinions that echo whatever the world around us is saying.
If you feel that investing is what your financial life needs to get to the next level, but something inside you is still resisting the change with all its might, you may be the victim of one of these investing myths. Can you recognize any of them?
Investing Myth #1: Investing is Risky (Super Risky!)
Although I would love to say this is 100% not the case, I can’t. Investing does entail some risks. However, the level of risk will vary from instrument to instrument and even from industry to industry. Comparing the risk you incur when you decide to invest in Treasury Bonds versus what might happen after you exchange all your life savings for a (virtual) pile of Bitcoin is like comparing oranges to grapes. The comparison doesn’t even make sense.
The good news? Regardless of your risk appetite (aka, how well you tolerate a higher level of risk), there are investment tools
Investing Myth #2: You Need To Be An Expert.
With so many books, podcasts, articles, and specialized publications that discuss, evaluate, and in general, try to make sense of the ever-growing pit of investment information out there, believing that you need to have a thorough understanding of the topic before backing your beliefs with money it’s understandable. And a common misconception.
Far too many people spend years building their knowledge base but not putting any of those learnings into action. When it comes to investing, the general rule is quite simple: the lengthier your investment time frame is, the bigger the return will be. While there’s nothing wrong with taking some time to understand the fundamentals, you don’t need a PhD in finance to get the ball rolling.
Investing Myth #3: A Big Upfront Investment Is Required.
To be honest, in the early 2000s, this myth was still somewhat true. Brokerage firms and many banks had minimum investment requirements across their portfolios and products. Fortunately, with the introduction of fractional trading things have started to change. Nowadays it’s possible to open an account with $0 while keeping up small contributions. No need to save a small fortune to get you started!
Investing Myth #4: You’re Waiting to Find the Right Stock/Bond/ETF/All of Those Combined.
Should I invest in Stocks or Bonds? Index Funds or ETFs? And what about industries? Should you do tech, mining, energy, real estate, or a combination of everything? The main concern behind these types of questions is quite straightforward: what type of instrument can guarantee the best possible returns with the least amount of risk? The answer will always vary according to your circumstances and financial goals.
Legions of investment bankers have attempted to nail down the most efficient investment strategy (and the race continues to this day), but to this day the instrument that maximizes results in all possible scenarios and under all market conditions has yet to be uncovered. Don’t wait for perfection, it doesn’t exist.
To Wrap It Up: Investment Myths are Just That.
While there’s nothing wrong with listening to well-meaning advice from friends and family, remember that someone else’s story doesn’t have to define your own. Everyone has a different money story, and that is perfectly normal. For every scary story you hear, you can probably find 2 more that are as positive as those that are negative. Don’t fall for that trap.