Stock Market Fictions
Investing is a risky job. That’s true. But over the years many myths are being entailed to this statement, making the Stock Market a lousy place for investment. Here in this article, we will be unlocking the 7 Most Common
Stock Market Myths.
Are you Ready? So, Let’s get started:
Putting money in the stock market is equal to Gambling
People with less or no knowledge about Stock Market put their whole money in stocks. They gain for a quite while purely on luck. But make a loss at some point which is multifold times painful than the relatively more past gains. They start blaming the system. They start calling it not more than a little Casino. Is it a game of gambling? Of course, not.
Gambling is a zero-sum game. It is entirely based on luck. The game is arranged so that the owner makes the profit at the end. It is way flipped off in the Stock Market. Here, let’s take Equity class for instance, through which one can invest in Public Companies. The investment made multiplies as the Company business grows.
So there is an evident difference in the creation and transfer of money between both the stocks and gambling.
If you are rich then only you can become rich.
Remember this. Whatever stage you are in life now. It is the money which you have creates more wealth for you. Instead, it is the value you inculcate in yourselves that generates abundance for you. It is a general myth that only stockbrokers and rich guys can make money out of the stock market. This is entirely a false statement.
You can invest in stocks with sound relevant finance base even with Rs. 100 or Rs. 200. Yes. You can. If you don’t know anything about stock investing and you have enough money to invest. But then too, do start with small packets. Apply techniques and gain profits. If it falls back, learn from it. This will be handy the next time you invest with ample cash.
Investing is an impossible task for a layman.
Do I need an MBA in Finance or do a CA to start investing? Not really. Let it be any subject. To learn and grasp concepts. There is a considerable need for interest. If real interest is in place, rest things follow.
Investing is not a big deal. Develop the liking. Learn from the experts. We have some excellent quality basic get-going stuff in our blog section. Do check it out. It should be a game changer for you.
Trading is easy. Catch the rally when low and sell high
Yes. It is right to buy when the price falls and sell when it rises. This must be performed, only if you know the rationales behind why it collapsed and rose. Just if you have a sound understanding of the Company business and where it is heading currently.
Random buying and selling can only lead to painful losses eventually. If you wish to do trading, plan accordingly. Work on trading strategies. Never hit the bull’s eye aimlessly. Because if it is missed. Run from there before getting hooked by that bull.
Cheaper stocks can help earn more profits than expensive ones.
There is no cheaper or expensive stock. There are rather good and bad stocks. Try to understand this. The share price of a Publicly listed Company is just the price for it decided by the Market at that moment. Value is something different.
First, Focus on the value and not the price. Once a good homework is performed on digging the value of the Company. Price should be used only for the entry point. But never invest in stock merely because it looks cheaper or never deceives buying opportunities thinking it seems expensive.
Stocks at 52-week low/high cannot go beyond that.
There is an investing psychological bias called “Hindsight bias”. Under this, we are pretty sure about the happenings about the stock movement. We remain adamant that it should be like this only. There is no way out. Let me tell you. Please be safe and avoid this bias.
If seen a stock hovering at its higher or lower peak, people make decisions that this stock won’t move beyond this level. This is not true. Stock movements are instead controlled by various factors having a material impact on the fundamentals of the Company. Price to price comparison won’t help. Check out the current global conditions affecting the Company business flow.
IPOs are always lucrative.
IPOs or Initial Public Offerings. Private Companies when they decide finally to convert into a public one. They arrange IPOs. Here the Company comes up with a small ticket size of the investment. People know that if they own a couple of tickets, they become the shareholders of that Company. And they are getting at the cheapest cost. People do purchase a bulk quantity of such tickets. They invest in, thinking the Company will shoot upwards very soon. But what happens, in reality, is precisely the opposite.
There come many money traps in the name of IPOs. It is true that even the Big Companies of today’s world have started from an IPO. The catch is to identify such Companies at its bud level. This is pretty difficult as we cannot predict the future. But what we can think is measure the potential of the Company business. See how it is different from the other players in the market. Does it have some special advantage to other Companies to grab sales? Look for what makes it unique considering the future growth of the business
Invest in what the TV expert predicts
Newbies in investing do follow the TV Market Experts. They look for what they are recommending and act accordingly. They do sometimes earn on luck basis. But when they lose at some point for sure.
Think in this way. When you are watching the TV program where the prediction is happening. Don’t you think there are many other viewers too watching at the same time as you? They also will follow the expert’s opinion. If he says to buy at so and so price, all the crowd listening to him buys the stock which uplifts the price on a temporary stand. But the price falls again in due course.
The only conclusion here is: Never practice trades only on the basis of others’ words (including the television expert). He must be throwing such bargain evoking opinions for his personal interest. We may not know. Do your own research or hand over the money to the best Investment Advisor in town. But never get trapped with the media opinions.
Hope it was a great value-adding read.
So, Have you been prey to any of the above or any other stock market myths? If yes, then do share in the comment section. We do read and reply to all of our blog comments.
Thank you. Wish you happy investing!