As a new investor, when you ask about good market strategies, experts can give you many ‘truths’ that may not actually be true. Hence, you must be quite careful while starting your investment journey. In fact, what you probably used to be a key investment principle may turn out to be an investment myth.
Let us shed light on six investment myths that you should ignore:
1. Waiting for the Market to Fall Before Investing: It is often assumed that investors should buy shares at the right time when they are trading low. While this is an ideal thing to do, sadly no one knows the exact time. So, if the stock you want to buy is available at the right price, you can buy it. If you wait too long, you might not even get it at the current price.
2. You must have a significant amount of: There is a myth that you need a certain minimum amount to be able to invest. even if a little ₹500 per month, you can start your investment in mutual funds.
3. Becoming an Investor Must Take Time: This is far from the truth. There are two ways to become an investor: active and passive. If you want to invest actively by understanding various investment options and knowing about their risks, then you need to invest time.
On the other hand, you can invest passively by investing money in some index funds, aligning your investment goal with the constituent stocks of the index. For this you do not need to invest time in trading.
4. A must buy security when it is available at a good price: Just because some stock is available at a good price, you shouldn’t buy it. You should buy a security only when you believe it will rise — either it is a growth stock or a value stock. On the other hand, when a company’s fundamentals are weak, its stock may not have strong potential to grow in the future. Hence, regardless of the price at which it is sold, it may not be a good pick.
5. It is not possible to outperform the market: It is often argued by financial experts and economists that the market corrects itself and that economic growth is actually reflected in the market index. Hence, there is a perception that it is not possible to earn more profit than the market index. This is definitely not true.
There are many funds that offer higher returns than the index, and moreover, your choice of stock will not necessarily be the same stock that comprises the index – at least not in the same proportion. So, your portfolio will follow a different trajectory.
6. Past Performance is a True Indicator of Future Growth: Most of the fund houses try to woo the investors by showing the past performance of the funds managed by them. But what happened in the past cannot be repeated in the future. In other words, if a fund consistently posts 10% returns over the past five years, it does not mean that it will perform the same way in the next year.
Therefore, we can highlight that beginner investors should be careful and careful about where and how much they invest. And no matter what they decide to do, they should not follow any arbitrary and irrational advice. Firstly, they should not believe in these myths.
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