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By LUDOVIC GAUTHIER 1,456 views
FINANCE

Insider On The Reality Of Stock Market Myths

Most people are worried when they think about share trading or investing. As it stands, despite how much society has advanced, many people still remain in the dark regarding trading financial instruments. Unsurprising, the stock market is full of all sorts of rumors and myths. Here, we attempt to unpack a few of the most popular ones and explain the truth underneath it all.

Again, before investing or trading in the stock market, it is vitally important that you do your research. You never want to go into the stock market blind. This way, you can get more confidence and knowledge to better help you with your trading and investments. Make sure to keep reading to learn more.

The stock market is an exclusive club

For some reason, most people believe that the stock market is some kind of exclusive club only reserved for brokers or the super-rich. But that is not necessarily true. This is mainly due to the advent of the internet. It has made the stock market so much more accessible to retail traders and investors, as well as anyone interested to get into trading. People can also access the stock market through their smartphones, meaning they can check on it 24/7 anytime, anywhere. All in all, data and other research tools which were previously only available to brokers are now public for anyone to use.

Stocks that go up must come down

Unfortunately, in this case, one must remember that stocks do not obey the laws of physics, in the sense, there is no technical ‘gravitational force’ to pull a stock back down. However, there is nuance to this myth. This is not to say that stocks do not undergo correction – which is a decline of 10% or more in the price of a stock from its most recent peak. Rather, a stock’s price is a reflection of how the company is doing. If the company continues to do well year over year, then its stock price will most likely continue to rise.

A little knowledge is better than none

Most people would argue that knowing a little bit about a topic is better than knowing nothing about it. While for the most part, this is true, you need to do more than that if you want to succeed at trading in the stock market. It is crucial that individual investors have a clear understanding of how the stock market works, and what they are doing with their funds. Traders must do their due diligence before committing to any stocks or strategy when trading. A trader that does not do their research may end up incurring a lot of losses in the market. As such, they should consider investing in a broker or financial advisor who can help them trade. While it can be costly, the cost of not understanding how to trade and making avoidable mistakes is higher than getting a broker to assist you.

It is impossible to beat the market

A few traders are fond of the saying that it is impossible to beat the market. However, that seems like a bit of an overstatement. Rather than ‘impossible’, it would be more accurate to say that it is difficult and challenging to beat the market. It takes incredible strength of will, discipline, research, and patience, but it can be done. In fact, there are plenty of strategies online that people can read up on regarding how to beat the market. A few of them are complex, but some are simple to implement. While it does take a lot of time and skill, which traders much nurture and cultivate, it is not impossible to do so.

You cannot invest unless you have a lot of funds

This myth is a subset of how many people believe that dealing with the stock market is only for the super-rich. However, as stated before, this is not true. Yes, there may be certain stocks you would want to avoid as their prices may be very high, but you can technically still be involved in the stock market and build your own portfolio with as little as $1,000. For instance, you can start investing in passive index funds with as little as $1. All in all, if you are worried about not having enough funds to trade and invest with, then you can breathe a sigh of relief.

Trading costs are expensive

In the past, there was some truth to this statement. Fees could be very high, and if you ended up paying too much for them, it could wind up destroying your bottom line. However, nowadays most brokerages only charge fees between $5-$7. Even better, a few reputable brokerages charge nothing per trade! Overall, because fees tend to be lower now than they were before, you should not be spending so much on them. It also should not affect your results that much either. If you are truly worried about fees racking up, then it may be best to consider a broker that requires zero trading fees.

Stock trading takes too much time

Quite a lot of people believe that in order to do well in stock trading or investing, one must glue themselves to stock market charts or the news to find quick opportunities one can take advantage of. As such, most people may think that stock trading and investing is too time-consuming, especially with the busy lives many people live. This is also not true. While it does take some time to keep up with the stock market – especially if you are a beginner – if you plan your time well, it does not have to be a time-consumer endeavor. Rather you can invest in a reputable broker or financial advisor that can make trades and investments on your behalf, so you do not have to worry about monitoring your portfolio. With technology advancing rapidly, you can even use a Robo-advisor, which is even faster as everything is automated. You only need to them your goals and objectives, risk tolerance level, amount of funds, and other such factors before they start automatically making trades on your behalf. All in all, how much time you want to put into monitoring your stocks and portfolio is really up to you.

Ludovic Gauthier
Author
LUDOVIC GAUTHIER

Ludovic Gauthier is an investor and financial markets writer with over a decade’s experience in the sector. You can find more of his articles at medium.com/@Ludovic.Gauthier.

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