If you’re new to the world of investing, it can sometimes be hard to separate fact from fiction. Indeed, there are some preconceptions about investing that could put potential investors off completely, simply because they’ve – falsely – been led to believe that it’s not right for them.
Here, we tackle five common myths about investing, explaining why not everything you read is necessarily true…
Myth 1: You have to be rich to invest
For some, the word “investing” conjures up images of The Wolf of Wall Street, and rich men in tailored suits throwing obscene sums of money at the stock market. However, while you will find plenty of rich investors aiming to be the next Warren Buffett, it’s a world that continues to become more and more accessible.
The rise of investment apps, for example, has provided a platform for people to dip their toe in the market, with the ability to invest even the smallest of sums as a starting point.
Myth 2: Investing is just gambling
There are risks associated with any investment – the value of your investments can always go down as well as going up. For this reason, some people compare investing to gambling – but there are significant differences.
Gambling involves taking uncalculated risks with your money. Investing, however, involves more calculated decisions, based on the many factors involved in the investment of your choice. For some, the use of an investment broker is the preferred way to mitigate these risks.
Myth 3: Investing is too complicated
Do you really need to keep up with daily financial news? Is it necessary to know the markets inside-out? Do you need to have the time to monitor your investments daily to track any changes?
The simple answer is no. Of course, learning the basics of investing – in whatever type of investment you’ve chosen – is a good way to gain confidence. However, investing can be as high-maintenance or as low-maintenance as you want it to be: there are options for everyone.
Myth 4: Investing involves locking money away for years
You may be avoiding investing your money because of a fear that you won’t be able to access it if it is needed. While many investment types are designed to reward investors over the longer term, there are also options available for those who want the ability to withdraw their funds at short notice.
Myth 5: Investing is too risky
The phrase “you may not get back what you invest” is plastered everywhere on investing literature, and for good reason: it is vital that investors realise that returns are never guaranteed. However, risk levels vary depending on the type of investment you choose.
At the riskier end of the scale, you’ll find choices like options, futures and penny stocks. At the other end of the scale, ‘cautious’ funds are designed for those who want to invest with fewer potential fluctuations. When you invest, it’s vital to opt for a level of risk that you’re happy with.
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