When your average person thinks of stock trading, they often picture rich people in suits gambling away huge amounts of money while staring at complicated graphs on screens.
The reality is in fact nothing like this – investing in stocks is not as risky, expensive, or as complicated as you may think.
Below are five common stock trading myths debunked.
Investing in stocks is essentially gambling
While investing in stocks does involve more risk than putting your money in a savings account, it’s a far cry from the risk commonly involved in gambling.
You can often make educated decisions on the best stocks to buy based on their history and the nature of the company.
Providing you’re investing in established companies and spreading out your money across multiple companies (i.e. diversifying your portfolio), there’s virtually no chance that you’ll lose all your money unless the entire stock market crashes and never recovers (which is very unlikely).
This isn’t the case with gambling, which tends to involve an all or nothing approach.
You need a lot of money to invest in stocks
A lot of people believe that you need to own hundreds and thousands of dollars to buy shares of companies. This is completely untrue – with today’s micro-investment apps, you can buy part-shares for as little as $1.
This means that you could potentially invest in ten companies at only $10. You won’t make back as much money as if you were investing $1000, however it could be a good start (you could add more money each week and slowly build up your investment).
Investing in stocks is complex and requires a deep knowledge of finance
You don’t need a master’s in finance to understand the stock market. The secret to trading success is actually pretty simple and doesn’t involve understanding complex technical indicators.
That isn’t to say that educating yourself first can’t help – it can be useful to understand some of the terminologies such as ‘portfolio’ and ‘dividends’.
However, you don’t need any educational background in finance and can often work out whether to buy or sell simply by determining if the value of a stock is going up or down.
You need to be prepared to pay high broker fees
While traditionally many brokers did charge high fees, there are now many brokers that charge very low fees.
There are even some stock trading apps and platforms that charge nothing at all. It depends on whether you want a broker to make investment decisions for you or not.
Now is not a good time to invest in the stock market
The pandemic and the political changes that have taken place recently had made the stock market more volatile. But that doesn’t mean that it’s a bad time to invest.
In fact, a lot of money can be made during times of volatility. One might argue that there’s never a bad time to get involved in stocks.
Even at the beginning of 2020 when all the stocks crashed, many of the stock prices rose again shortly after – some dramatically – allowing many people to make back their money in a matter of months. It’s never about when you buy, but what you buy.