Did you watch the MythBusters TV series?
If you don’t know what I’m talking about, MythBusters is an Australian TV series where two guys do “weird” experiments busting myths. It’s astonishing to see how people genuinely believe in some of these myths, only to find out, they aren’t true.
We are biased from our society, culture, parents or friends to believe that stock market is risky, a kind of casino and only for rich people. The problem with market stock’s myths is that they are holding you back to access a wonderful wealth creation vehicle.
The stock market is a proven way to prosperity which is doing the heavy lifting for you. In fact, any wealthy person that I personally know, have money in the market stock. And the reason is simple; wealthy people are SMART with their money.
They know that investing in the stock market offer better returns than living money sitting in saving accounts, CDs or by holding bonds.
Now that I think about it, I’m guilty of procrastinating to invest in the market stock for years. I could have started in 2000 when I first get a paycheck, but I procrastinated till 2005. The result?
Hundreds of thousands of dollar in lost opportunities. My only regret is not have busted the market stock myths earlier.
That’s why in today post I’m going to bust the 3 biggest myths about stock market so you can start investing with confidence and peace of mind.
1# MYTHS – ONLY PROFESSIONALS CAN INVEST IN THE MARKET STOCK
One of the biggest myths about investing is that it’s hard and should be left to the experts.
“Oh dear”… I wish I knew any better. In my working years as Chef, I thought that market stock investing wasn’t suitable for the average person and should be handle over to professionals in the industry. I felt so scared to lose everything.
The logical next step (thinking back, not so logical) was giving my hard earned savings to a “professional” financial advisor. I prefer don’t share the amount of money I have lost, only the thought, make me sick – very sick. On the other hand, my financial planner bought a new Mercedes Benz and didn’t feel even sorry for my lost.
Over the years I’ve learned that we are responsible for managing our money. If we don’t, someone else will do for us but keeping most of the profits. Not only that, but you’re risking the capital invested whether the other party has no skin in the game.
Look, I feel your struggle in believing that you can do it, but believe me, you can.
I’m an ex-Chef, I didn’t go to university, I don’t have any investment qualifications or any fancy certificate… but today, I’m living comfortably by investing in the market stock. And I’m not the only one without a financial background to do so:
- Jay from FI Fighter – This guy is an engineer that gave up his successful career in Silicon Valley to truly experience life without the 8-5 drama. How? By investing. At the moment Jay is totally focused on investing in precious metal stocks. And let me tell you this; “He is making a hell of returns.” In 2016, he doubles his portfolio value.
- Sabeel from Road Map 2 Retire – Sabeel regularly saves part of his paycheck so he can grow his wealth by investing. He buys blue chips shares that pay regular dividends. He started in 2008 making a mere US$19 of dividend income in 2008. Last year he made US$ 9,000.
There are many regular guys out there that are investing and doing exceptionally well. Do you still think that you can’t?
Hell yeah! Investing is like any other professions. First, you learn the basics, and then you practice till you become an expert.
Man, just get started. It’s going to be an exciting journey.
2# MYTHS – DIVERSIFY OR YOU ARE GOING TO GET ROASTED
Can I be honest even if I’m going to be brutal?
This is really good advice for people who are ignorant about investing. This myth is been created by the financial industry to protect people from their own ignorance.
And it goes along these lines:
- Diversify to minimize risks.
- Diversify and hold your portfolio for the long term.
- Play it safe, diversify.
- Diversify by your age; % of stocks and % of bonds. The older you get, the more bonds you should hold.
I don’t say that diversity is a bad thing, but my point is that knowledgeable investors don’t diversify; Bill Gates major investment is Microsoft – Warren Buffett’s portfolio of over $100 billion is focused on about 10 stocks – Jeff Bozos main interest is Amazon.com.
By focusing on the thing that they know and can do best, rich people get richer while poor people get poorer.
The answer is to Invest in what you understand and only when is on sale. It’s like get a 10 dollar bill for a fiver. If you can learn to do that, diversification is a waste of time and most luckily going to reduce your returns.
So, what do you want to do?
The choice is yours.
P.S Please, don’t tell your financial planner about this. He might seriously act as a weirdo.
3# MYTHS – YOU CAN’T BEAT THE MARKET
This is a tricky one, and the reason is because only a small elite of investors can beat the market – regularly.
In fact, the Pareto law is at work here; 20% of investors take the 80% of the rewards. On the other hand, 80% of investors barely make a profit or lose money in the process.
You can understand better by studying the market wizards who have accumulate riches over the years.
However, the small investors like you have an advantage; FLEXIBILITY.
The BIG guys run BIG funds, making them quite illiquid and corner to a minority of investments and markets.
In fact, the act of a BIG guy exiting a stock or sector is the reason stock price goes down. As the price drop, other BIG guys feel the squeeze forcing to liquidate their positions causing “sell panic.”
Just think about the domino effect.
The good thing going for you here is that you can access to a broader investment marketplace (small sectors where hedge funds can’t operate) and also, be much more flexible in your investment strategy. BIG guys need in average 3-12 weeks to exit a position. A small investor can exit in hours – few days most.
If you’re knowledgeable about that company and sector, you can stay calm and buy it at a great discount price while the BIG guys are in full panic mode. And when you do that, you will crash the market, literally.
And you might wonder: “Rudy, how much you would consider small?”
That is a good question, my friend. Look, there isn’t an all fit type of answer, varying by investments and sectors. However, if you are investing in the local market stock, until ten million dollars, you’re small enough to keep your agile advantage over the BIG guys.
THE MYTHS ARE BUSTED
In conclusion, there are many myths and misconceptions about the stock market. Most people hold back learning to invest for fear of losing money, maybe low self-esteem (I can’t do this, I’m just a Chef) and sometimes, not fully understanding the massive growth potential to one wealth.
Lastly, stop listening to your uncle Jerry’s advises. If he isn’t wealthy is because he doesn’t know how to create wealth in the first place. By listening to his market stock myths, you’re missing an opportunity for early retirement. Don’t work till 60 like your uncle, there is a better way.
I hope, by busting the 3 biggest market stock myths, you will feel confident enough to start investing in the market stock so you can leverage your savings and reach financial freedom faster.
Do you have any other myths to bust? What is holding you back from starting to invest in the market stock? Leave a comment — I’d love to hear ’em!