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INVESTING 101 EDUCATION

Investing Myths Proved Wrong

Many people look upon investing as a mysterious, “scary” thing that’s only for rich people. If your parents or friends don’t invest, you may be less likely to invest, too. Unfamiliarity with investing is one of the biggest obstacles that people mention when asked why they don’t invest their money. To make matters worse, there are lots of investing myths that go around that simply isn’t true. Here are some misleading myths about investing that you shouldn’t pay attention to.

Investing is Only For The Wealthy

It’s true that most of the wealthiest people in the world are investors. The names Warren Buffet, Charles Schwab, George Soros come to mind. But wealthy investors weren’t necessarily born with that wealth. In many cases, investing is what made them wealthy. For example, Warren Buffet started investing at the tender age of 11, when he used the money he earned from being a paperboy to buy some local farmland. Over time, Buffet amassed the fortune he’s known for today—through savvy investments.

Investing is for anyone who wants to get into it. You can invest with as little as a few hundred dollars and as much as billions of dollars. There’s no age limit or income limits when it comes to investing. Depending on your financial circumstances there’s always a good investment option available to you.

Anyone Can Pick Stocks

There are now several self-controlled stock trading platforms online, such as Etrade and TD Ameritrade. All you have to do to open one is to register an account, connect your bank info and you’re all set to trade stocks. You can use the platform to buy, sell and sometimes even engage in futures and commodities trading. While it’s technically true that anyone can trade stocks, not everyone can do it well.

Stock picking is a highly complex process. If you want to do it right and protect your investments, you need to educate yourself about what to look for in a promising stock. The stock market is highly volatile. The highs can be amazing; the lows can wipe out your account down to zero. In that way, trading stocks is similar to gambling. One day you’re worth more money than you’ve ever had; the next, you’re worrying about making your next mortgage payment. Not everyone has the skills and knowledge to successfully pick stocks. So even though you can open up a DIY stock trading account, you may not want to trade without the help of a stock advisor.

The Best Place For Money is in the Bank

In the past, people used passbooks to keep track of their money in the bank. Whenever a person made a deposit or withdrawal, the teller would dutifully update the passbook with the amount of interest the account had earned in between transactions. Those days are gone. Not only have passbooks disappeared in the wake of bookkeeping software; banks rarely pay out interest. Instead, they charge customers for the privilege of having a checking account. Interest on savings accounts is so small as to be insignificant. The bank is no longer the best place for your money if you want to earn any interest on it.

The smartest thing you can do with your discretionary income is to find ways for your money to work for you through investments. Investing your money is the only way you’ll earn substantial interest these days.

You Should Follow Your Instincts

People often say that it’s important to follow your instincts or trust your gut when it comes to investing. That’s bad advice that can land you in the poor house. Emotions can make you do things that can ruin your financial portfolio. The most important aspect of investing is to be as objective and non-emotional as possible.

Instincts and gut feelings have no place in investing. Your instincts may serve you well in other areas of your life, but unless you’re a full-time financial professional this tactic is a bad idea. There’s no magic when it comes to successful investing. You need to look at the facts and figures and make decisions based on hard evidence.

Private Money Lending is Only For Professionals

Private money lending is an investment option that many people assume is only for professional financiers. It’s true that private money loans typically serve professional-level development projects. Hundreds of thousands of dollars are pooled together to fund things like housing developments, manufacturing facilities, commercial office spaces and more.

What isn’t true about this investing myth is that private money lending is only for professionals. Any accredited investor can privately lend money to a project. The key to success is to choose the project sponsors wisely. You’ll want to look at their history of following through on the loan terms as well as other details. But you don’t have to be a professional investor to make money from private money lending.

History can Foretell the Future

There are numerous adages that contribute to this myth, such as “history repeats itself,” and “look to the past to see the future.” These may or may not be true in other situations, but they aren’t true in investing. In fact, any time a public company puts out earnings reports, there’s always small print that says along the lines of, “past results do not represent future results.” That’s because these companies know of this investing myth and they want to ensure that investors aren’t making important investment decisions based on historical data.

There are abundant investment myths that won’t serve you well if you want to make your money work for you. The best thing to do is to educate yourself, seek the advice of professionals and to make up your own mind about what kinds of investments are right for you. If you decide to learn more about private money lending or real estate investing, we hope you’ll contact us. We’d be happy to share our opportunities with you and answer any questions you may have.