Stock Trading Myths
Even though there is a lot of money to be made in the equity market, still many people shy away from investing their money in the market. Lack of knowledge and risk aversion makes one stick to the bank saving instruments which not only offers a very low rate of interest but also does not beat inflation.
There are a number of common myths that you will come across when you talk to people and ask them why they do not invest in the market.
Investing is like gambling
Many link investing to gambling. This is why they do want to be a part of it. You need to know that investing and gambling are not the same. When you buy a share of a company you are basically taking ownership of the company and this makes you eligible to claim the assets as well as get a portion of the profit that the company generates. People just relate buying stocks to trading forgetting that by buying stocks you actually own the company.
The shareholders try to find out the profit and this causes the price of the share to fluctuate. The share prices change because the business outlook changes and the earning of the company also changes.
You need to understand the value of the company and what its future prospects are.
Gambling, on the other hand, is a game where money just changes hands without creating any value. It is thus a zero-sum game. But when you invest in the market you are creating value and helping the economy grow. Companies increase their productivity and they develop better products and create wealth for you.
The stock market is only for the rich
It is believed that the stock market, Bitcoin Code, is only for the wealthy and not for the commoners. This is absolutely false. The market is today open to all, thanks to the internet. The research tools have also been made available to all and thus even a retail trader can have access to vast information to judge which company to buy and which to sell.
Individuals can choose and stay invested for a very long term. Unlike the institutions that have to keep performing and showing results in each quarter, individuals, on the other hand, can stay invested with a longer-term outlook.
What falls will go up
People believe that stocks trading at their all-time low are a good buy. They believe that what goes down will come up. This is not true and very risky to follow.
What goes up comes down
This again makes no sense. Selling stocks, only because it is at an all-time high is not correct. The stock is trading at these levels because its fundamentals are strong. And there is no reason why it should come down in price.