Debunk These Investment Myths That Can Sink Your Portfolio

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investment myths

Buying and selling company stocks and shares 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 putting 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. Buying a top-performing fund just based on accredited reviews alone is not enough. You still need to do the groundwork to know what you are getting into first.

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 other stocks 

Investing in gold as a hedge against volatility 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.

Read More: What Affects The Price Of Gold?

However, for some, these money makers are often seen as the “less attractive” 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 cash to be carried by ten trucks?

Not necessarily, you can start your investment in shares with as low as RM100o or even RM100.

Read More:
RM1,000 Investment Guide: Where Do You Invest?
What Is Micro-Investing, And How You Can Start In Malaysia

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.

Looking to start investing? Check out our online investment options here.
This article was first published in April 2014 and has been updated for freshness, accuracy and comprehensiveness.

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