A trade or investment that has been well-planned can be very rewarding and help you attain financial freedom. However, people especially in India have been supremely skeptical of the share market. In contrast, several others have adopted the idea of investing in the share market. One of the worst mistakes that beginners make is going by the myths about the stock market. So, gaining a deep understanding of trading and stocks is important before blindly accepting any myths associated with it.
5 common myths of the stock market
Here are 5 of the most popular myths that have been passed around regarding the stock market thereby inducing fear and mistrust about the stock market in general.
1. High risk equates to high profits
In some cases, different types of investments and the risks involved could potentially provide a good return to the investor. However, to generalize that every high-risk investment will provide a high profit is not accurate. This has been one of the most popular stock market myths that have caused many to lose large sums of investments. It is important to also think about the potential losses from a high-risk investment. You could potentially lose as much as you could gain from the investment.
2. You require large capital to invest
Many believe that they need large sums of capital to be invested to expect high returns in profits. While it is important to have some money that is required for an investment, you don’t necessarily have to possess excessive amounts of them. Also, you have an option to make small monthly installments in mutual funds as an online SIP investment.
3. Investing is gambling
This is one of the myths that cause the masses to shy away from investing. By gambling, many believe that the fluctuations in the stock market are unpredictable and have no credible reason or base. However, that’s not the case. The price movements of stocks are based on several factors such as the news, partnerships, offering of bonds, and many more.
4. Take a chance with stocks
In general, gaining some knowledge on something is considered an asset. This is a myth, especially a mutual fund myth when it comes to investing. If you do not have the time and resources to carry out extensive research, it is recommended to get the help of an advisor.
5. Stocks that plummet have to go back up
This is one of the most common myths about investing. It is not necessary for the stock price of a company to shoot back up after a fall. One of the best examples is the stock of Reliance Communications. The company made its stock public in March of 2006. Since then, being a subsidiary of the popular Reliance Industries, the stock price kept increasing to its highest price of Rs. 844.7 in January 2008. Since then, the stock plummeted continuously reaching a price of Rs. 1.80 as of March 2021.
It is always beneficial to perform your research instead of falling into the trap of baseless myths. Although the stock market comes with its risks, the benefits are equally rewarding. Once you open a trading account, you can begin your online trading and investment journey with small deposits. Hence, bust these myths and begin with your investment journey after thorough research or with the help of an advisor.