5 Investment Myths Busted

Financial problems

Equity trading may seem like an easy way to get rich quick but jumping on the bandwagon just because your neighbour made some serious cash can spell T-R-O-U-B-L-E.

Though it can potentially yield great returns you should only jump in armed with the right knowledge. Consider these before plunking your hard-earned cash onto some excitable shares just because your best friend’s cousin’s wife’s brother made some quick cash off of it.

1. If it worked once, it’ll work again.

Lightning doesn’t strike in the same spot twice when it comes to investing in shares. There are too many factors, including current economic volatility, social upheaval and political instability that may have affected the performance of shares you made cash on previously.

If a developed country like the US can run afoul with mortgage issues as well as house some of the biggest investment frauds (Ponzi scheme anyone?) in its history, we should realise that we too are vulnerable to uncertain economic cycles that can derail our investments. Remember, history helps us form the groundwork for the future. It doesn’t repeat.

2. Accreditation means the stocks are good.

A company’s shares that earns a five-star rating is as good as a movie getting rave reviews from critics then later flops at the box office. A good rating does not mean the performance would endure and grow. “There is no evidence that superior performance persists. If you buy a top-performing fund, you have no better than a random chance that it will post above average performance,” said Marry Ellen McCarthy, registered investment adviser with Responsible Investing of Brookline (US).

It is acceptable to invest in an actively sought-after and praised company, but buying shares based on the money it made for other people last year may not yield similar results this year.

3. Gold and bonds are safer bets compared to equities.

Gleeful appreciation of gold values has been the sales call of the jewelers to lure us into parting with our money in exchange for some gold. Similar to gold, bonds are also another “slow but steady” investment that have attracted many to invest in.

However, for some, these money makers are often seen as the “frumpier” parts of an investment portfolio.

There are high-yield bonds that are safe to take on, but they are also victim of contemporary socio-political repercussions like we often seen happen in the Middle East. As safe as they seem to be, they are not completely immune to external damaging factors.

4. You need a finance degree or specialist skills to invest in shares.

You don’t. The most common adage newbies get from investment gurus is, “do your homework before investing in anything”. As in most cases, experience and knowledge (not just luck) count in investment.

To fatten your knowledge bank, you need to constantly keep yourself updated with news that may affect the market.

Warren Buffett once said, “You don’t need to be a rocket scientist. Investing is not a game where the guy with 160 IQ beats the guy with 130 IQ.” And we agree with Buffett, you need to be informed but you don’t need to have specific qualifications for it.

5. Share investment requires a lot of cash.

You may have heard about folks who have pawned their valuables and immediately had access to a fistful of currency to invest in. But does investing in stocks really require enough bags of dough to be carried by ten mules?

Not necessarily, you can start your investment in shares with as low as RM100.

In short, it may not be much, but it is enough to “test the water” to see if it’s really your cup of tea.

We call these myths busted. So go ahead and pull that investment trigger. You really just need to have enough knowledge and information to back you up, you’ll be equipped to make wise financial decisions that might make you (or at least save you) a lot of money.

When it comes to coffee-table wisdom, leave it on the table; as when you make the potential bank-account altering call, you are, indeed, alone.

Ready to put your money in stocks? There’s no way around it, you’re going to need a stock broker. Consider these things when choosing your stock broker.

Looking for the next hot investment? Consider investing in Initial Public Offerings (IPOs). Here’s a beginner’s guide.


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