People lose money in the stock market, and this can lead you to mistrust it. Because of this, you may believe the myths about trading that people are always repeating or spreading these days. However, the top five stock market myths are just that: myths
#1: Trading stocks is equal to gambling.
When you buy a stock, you are becoming an owner of the company. This means that you will receive a small amount of the company’s profits. To make their choices, investors decide which companies will make the highest profits. The only thing gambling does is take money from the person who made the wrong bet. Nothing of value is created.
#2: The stock market is only for the rich and stockbrokers.
The Internet made it possible for everyone to take part in the stock market. This means that everybody has access to the same tools that the stockbrokers are using.
#3: What goes down will eventually go up.
Typically, amateurs think this way. It leads people to buy stock at $10 a share and hope that the price returns to last year’s high. The better plan would be to buy stock in a small company that has recently gone from $5 to $10 a share. If you are choosing your stock based on more than just the price, you will be a better investor.
#4: A stock that has gone up is going to come down.
Unlike many other things in this world, stocks that go up do not necessarily have to come down. It depends on the company. If an excellent management team is running a company, the company’s stock can continue to go up. One example is Berkshire Hathaway. In five years, this company’s stock went from $7,455 to $17,250 a share. If you had waited for the price to come down before you bought stock in this company, you would not have been able to enjoy the ride up to $170,000 a share.
#5: Knowing a little is better than not knowing anything.
Of course, it is better to know something than to know nothing about trading stocks. However, you will need a lot of knowledge before you place your money in the stock market. The ones who are not losing a lot of money are the ones who are studying the markets before they invest. Fortunately, you do not have to do this work on your own. You can hire an advisor to help you.
You would not want someone to operate on you who has limited knowledge about the body or intricacies of the operation. The same rule applies in investing. To be good at it, you will need to spend some time practicing and learning.