4 Dangerous Myths About Investing
Investing your money is the most sensible way to save for the future but there are a lot of risks involved. The recent popularity of cryptocurrency has encouraged more people to get into investing and, while some of them have made good money, a lot of people have lost significant amounts. The reason that people tend to lose money when they invest is that they follow bad advice. There are a lot of misconceptions about investing of all kinds that lead to people making bad decisions. If you’re going to start investing some of your money, make sure you don’t pay attention to these myths.
Anybody Can Do It
This is a big misconception that people have about investing that is half true in a sense. It’s true that anybody can buy stocks and shares or cryptocurrency. Anybody can invest their money in vintage wine or classic cars or buy a property. But that doesn’t mean anybody can actually make money from their investments and avoid losing their savings. If you’re going to be a successful investor, you need to be able to anticipate the markets and make good decisions about where to put your money. Not everybody can do that because it requires a good knowledge of the financial world. So, anybody can make an investment, but not everybody can make a sensible one that will see returns. If you don’t have an in-depth knowledge of the financial world, you need a financial advice service like Miramontes Capital to help you. They can use their expertise to give you good advice on where to put your money for the best returns. Speak to them about your investing goals and they’ll be able to guide you and help to reduce the risk of large losses.
Diversification Is Key
Diversifying your portfolio means spreading your money out over a lot of different investments so if some of them go bad, you’re not losing all of your money. Advice on investing often tells you that this is one of the golden rules and everybody should always do it. While it is true that diversification is a good way to protect your wealth, it doesn’t work for everybody. If you’re already wealthy, diversification is the way to go. But if you’re starting out with a relatively small initial investment and you want to build up some wealth (which most people that are saving for later life are trying to do) diversification isn’t the best idea. If you’re spreading your money out too much, you won’t build wealth that quickly. You’re better off putting larger sums of money into safe investments that are very likely to give you a return.
Bonds Are Risk Free
Risk free options are the holy grail for investors but, unfortunately, they don’t really exist. A lot of people will tell you that bonds are completely risk free, which is why they’re such a popular investment option. But the truth is, any investment carries some level of risk, even if it isn’t much. Bonds might not be that risky compared to other options like stocks and share, for example, but they’re nowhere near as safe as people often think. The value of bonds move in the opposite direction to interest rates and, as interest rates are incredibly low at the minute and could increase at any moment, the value of bonds is likely to drop. Inflation can also have a negative effect on the returns that you get from bonds so just be aware that they’re not the easy option that a lot of people perceive them to be.
Buy And Hold Doesn’t Work
Buy and hold simply means buying stock and keeping it for a long period, rather than selling it for profit when it is performing well. A lot of people say that this method is no longer a sensible one because the stock market is quite volatile at the minute and the chances of seeing long term gains are very low. That is true in some sense and it’s fairly good advice for the market as a whole. However, there are some stocks that do show good performance over a sustained period and, for those, buy and hold is still a viable option that brings good returns. Big tech companies like Amazon or Apple, for example, have consistently performed well for a long time and people that own stock have seen good returns. As long as you pick the right stock, buy and hold can still be a good strategy.
Don’t fall prey to these myths about investing, otherwise, you’re not going to make sensible choices with your money and you won’t see healthy returns.
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