SprinkleBit’s Trivia Tuesday for this week will give you insight to 5 common investing myths. Too often investors risk suffering unnecessary losses or lost opportunities from blindly accepting investment myths. Debunking these myths is a great way for beginning and even experienced investors to further educate themselves on the understandings of the market and investing.
Myth 1 – Only find investment opportunities that could potentially “hit it big”.
Fact: Simply looking for “the one” or few investments that could potentially hit it big has a much higher risk than investing strategically. Cutting losses and doing your homework will help an investor make more over the long run. Losses hurt more than gains help.
Myth 2 – Studying the market will help you do better.
Fact: While having awareness of how the market is doing is logical from an investor’s point of view, better investors are more prone to studying the companies they hold stakes in. Taking the time to study the company itself is a strategy that even Warren Buffet relates to.
Myth 3 – Investing internationally is riskier than domestic investments
Fact: It is riskier to not invest internationally. As global business expands, smaller countries are emerging into the global economy. So why not even invest at least 15% of your portfolio in international economy? These days, it is common for mutual funds to allow easy international investing.
Myth 4 – Receiving high annual returns means your mutual fund has a good strategy
Fact: How much does a mutual fund’s past performance affect their future results? Not very much. Usually these mutual fund companies even acknowledge that there is no relationship between past performance and future results. Reviewing long-term returns is the best gauge for how well your mutual fund doing.
Myth 5 – Having an intricate investment plan is the best way to outsmart the market.
Fact: Investing was never meant to be easy or else everyone out there would be doing it. However, making a complicated investment plan only makes investing more difficult on the investor. Go back to basics of value investing. Buying and holding. Minimize those risks by simplifying your strategy.
