7 investing myths debunked with Emilie Bellet
âď¸ In todayâs episode, I look at common myths that might be getting in the way of your investing journey.
đ¸ Investing is key to building financial independence and reaching long term goals. When you invest over a long period, you want your money to outpace inflation (the price of goods and services is increasing every year) and benefit from compound growth. While itâs essential to have ârainy dayâ cash savings, playing it safe by stashing your money in low-interest-rate savings accounts is actually risky because that money will lose value over time.
đĽ Today on The Wallet:
1ď¸âŁ Investing can feel complex, laden with alienating jargon and might sound like something only others are good at â but I explain why this isnât the case.
2ď¸âŁ Before you start investing, itâs vital you ask yourself how long youâre willing to invest for. The longer your timeframe, the more volatility you should be able to deal with because youâd have more time to recover from any lows. Start small and invest regularly.
3ď¸âŁ I explain why asking questions and giving yourself praise are super important to everyoneâs investing journey.
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You can listen (13 min) and subscribe here:
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1.myth 1:Investing is Gambling
âPlaying it safe by stashing all your money in low-interest savings account, is actually risky â because that way, you risk losing money over time.â
You donât have to be massively risky and speculative with your investments. Instead, focus on building a diversified portfolio you hold for a long time. In order to do that, though, you first need to understand that investing and trading are very, very different.
Day trading is a lot more like gambling, and that thereâs no such thing as âget rich quickâ investments. FOMO (fear of missing out), hyped-up headlines and peer pressure should not inform your investment strategy.
Myth #2: i need to be an investing expert
Educating yourself should be your top priority. Remember, slow and steady wins the race! You are not a trader and individual investors wonât have the time or knowledge of professional investors.
Most people wonât have time to research and pick individual stocks. Passive investing is necessary for the majority of us. Remember that most active professionals can't beat the market.
Myth #3: I need a lot of money to invest
These days, investing is very democratic - you can start with even ÂŁ25, ÂŁ50 or your spare change. Start small and invest regularly. Savings apps and robo-advisers automatically stash away a regular amount of money and invest it in the stock market based on your preferred level of risk and when you need the money.
No one can predict market performance, but investing regularly (also known as pound cost averaging) can help smooth out your returns and ride out market bumps.
You can, of course, work with a financial adviser, but you usually need to have a certain amount of money to invest for them to manage your investments. There are lots of investing platforms for individual investors.
Myth #4: I wonât see my money for ages
Yes, the longer you hold an investment, the more likely you will increase your chances of returns. Market volatility is inevitable = markets will move up and down over the short term. So forget about the short term and trying to make a quick win.
However, you do not need to lock your money away in order to start investing. Itâs usually recommended to invest in the stock market for 5-10 years + but you still CAN access the money.
However, ideally, you donât want to have to rely on the money you have invested because thereâs a chance that it could negatively affect your returns. You want to avoid being forced to sell when the markets are in a down period, as your investments could be worth less than they were when you bought in.
Myth #5: I can lose all my money
Investing does carry some risk. Putting even a bit of money in the market feels terrifying when you donât have much of it or if you know little about how it works.
But remember that over the long term, these small sums build up. Leaving cash in low-interest savings accounts is unlikely to get you the returns you're after.
To lower your risk, try to remove emotions from investing. You can do that by using asset allocation, automating your investments and avoid checking your investments too often. Maybe just delete your investment app for a little while!
Myth #6: I have to know the right time to buy or sell
No, you donât! The stock market fluctuates, and many external factors can influence it. Itâs practically impossible to guarantee how itâs going. Thatâs why we say that investing that âitâs not about timing the market, itâs about time in the marketâ.
Again, start small and early - and for as long as you can. You will see downturns and financial crises, but remember that you havenât lost your money if you donât sell during these times!
Myth #7: Women donât invest
Absolutely false! In my experience, women are happy to take calculated risks once they understand the relationship between risk and returns (when you take more risk, you expect higher returns), diversification (not putting all your eggs in one basket) and that time in the market beats timing the market.
A Warwick Business School study found that women âoutperform men at investingâ by 1.8% because they trade less often and are not drawn to speculative stocks.
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