Plenty of people avoid the stock market out of fear, but learning how it works can help you make the right choices to mitigate your personal risk. If you’re looking to learn the “secrets” to investing before getting started, I’m sorry to report that there really aren’t any. Investing your money is one of the best ways to build wealth over time, but many people are hesitant to get started with investing due to various myths and misconceptions. Let’s debunk some of the most common myths that hold people back from investing their money.
Investing is only for the wealthy
One big myth is that you need to be rich to invest. This is simply not true—anyone can get started with investing, even with a small amount of money. Many online brokers now allow you to open an account and start trading with as little as $100 or $500. Investing small amounts consistently over time can result in significant wealth accumulation.
Investing is too risky
Some people think investing involves too much risk and you might lose all your money. In reality, there are many relatively low-risk investments like high-grade bonds and index funds that provide fairly stable returns over time. Yes, there are always some risks with investing but you can manage those risks through diversification. Here’s our guide to building an easy “set it and forget it” investment portfolio.
You need to “win”
Many people have this notion that the stock market is a big game where you need to pick “winners” to see results. In reality, very few investors consistently outperform the overall stock market year after year. Being an informed investor is important, but there’s no statistic that will tell you what the market is going to do next. Quite the opposite—trying to bet when the best time to buy and sell is (aka “timing the market”) is pretty much a guaranteed way to lose. It’s fine to just match the market’s long-term returns.
You don’t know enough about investing
It’s better to be self-aware about what you don’t know, rather than being too cocky for your own good. That being said, don’t assume you can’t invest until you’re some expert. It’s OK to start small and take your time learning about investing basics. You can begin with investing in your 401k at work or an IRA, both of which often provide set options like funds targeted for your estimated retirement year. From there, seek out educational resources to gain knowledge at your own pace. Over time, you will understand more complex investment products and strategies.
You need to hire an advisor
While it can helpful to have professional guidance, you certainly don’t need to hire an expensive investment advisor to get started. There are many accessible tools and apps today that make investing manageable for regular folks. Robo-advisors are run by investment management companies that use computer algorithms to manage and rebalance your portfolio, meaning there’s little decision-making (or “game-playing”) on your end.
You can start investing on your own through an easy online brokerage account. I’m personally a fan of Vanguard, and Fidelity is another top choice for many beginner investors. The bottom line is that investing is accessible for anyone to build long-term wealth.