The stock market is a volatile place and over the course of time, it has generated myths that tend to scare people away from it. There are certain stock market myths that spread like wildfire and people keep believing them without searching for the truth. What you have been told about the stock market might just be a myth. The following are the 7 myths about the stock market that everyone thinks is true:
Myth #1: The Stock Market is Just Gambling
This has been one of those age old myths that have scared off most traders single-handedly. As an investor you own stocks which make you part owner of the company you invest in. For most investors, there are profits that they can receive if they can sell the stocks at a higher price. When an investor is buying a stock, a value is created. Finding the value of a company is not a simple task, but it is not rocket science either. When you are investing, you are investing in companies and the wealth of the economy. Investing and creating wealth is not at all gambling just because it involves risks.
Myth #2: The Stock Market is just a Rich Men’s Club
Popular culture might exhibit that the stock market is only for people who are rich and it is impossible for normal people to gain entry. But the stock market is not an exclusive club. You don’t need to have fancy qualifications to invest and trade. With the advent of internet, you have more access to information regarding investing and you can easily educate yourself. The market is no exclusive club, you can use it to create your own wealth if you want to do so.
Myth #3: You need to be an Investment Guru to Invest
You do not need to be an all-encompassing industry guru to invest money. You should stick to the market sector that you are already invest in and try to learn more about it. By default, you will have more knowledge about this sector. You can go miles deep by doing this and it will let you understand the value of companies in various sectors. Just stick to what you know and focus on it.
Myth #4: You can’t beat the Market
You can invest and smash the market if you want to, there is no such thing as can’t beat the market if you have the knowledge to do so. It is hard for the big investors to manage large investments and get in at one price in a stock and get out at one price, when these guys exit from a stock the price fluctuates and it causes panic in the market. However, you should not panic and let your emotions take control of you, you should go shopping and buy the stocks that suit you at this moment so that you can crush the market later on.
Myth #5: Stocks will Go Back Up Eventually
Just because a stock price is low, it does not mean you should buy it. Some stocks are like falling knives, if you catch it you are definitely getting hurt. Investors would choose stocks that have had a good time in the market but for some reason is at an all-time low, thinking that it will go up after a while. But that is a deadly mistake and a myth. You have to understand that the price is only a single part of the equation but you cannot solve the equation with one part. Your goal in the stock market is to find solid companies at reasonable prices and let them grow.
Myth #6: What Goes Up Must Come Down
The stock market operates on its own and no laws can be applied to it. Bear markets do happen but bullish markets are more common. The stock prices are a reflection of any company in an industry. You have to find a company with an excellent management team that has a stock price on an upward trend and it will continue to be on an upward trend. The selection is extremely important.
Myth #7: Knowing little is good enough
In our everyday lives, knowing a little is better than knowing nothing but when it comes to the market you need to have a clearer understanding of investing. Investors have to put in the hard work and do their homework to succeed. You have to conduct your own research and read up on investing methods to get a full picture of what to do with your money in the stock market. Little knowledge will burn you out in the stock market.