With virtually unlimited supply of financial information accessible today, there has never been a more profitable time to know more about investing. Regrettably, there is also a good deal of misinformation that goes together with useful data.
Falling prey to market misconceptions can make you commit silly investing mistakes. Getting influenced by investing myths can majorly affect your financial journey. Common myths about investing can have a severe impact on quality of investment decisions you make. So, here is an attempt to tackle some myths about investing which is decoding investment myths is essential.
Myth 1. Too young to think about retirement
Reality: It’s never too early. You can build significant amount of corpus when you have time on your side. Being a stereotype who believes in not starting early will lose out later. Actually, starting early can help you build an enviable retirement kitty.
Myth 2. Tax-saving is the objective of financial planning
Reality: There are lot of people who rush to invest only for tax-saving purposes. However, meeting tax goals is not the only criteria in investment. Investments are to be planned in advance to meet your financial goals too.
Myth 3. Investing requires lot of funds
Reality: Times have changed. You don’t need a large sum to invest anymore. There are investment options like mutual funds which allow you to invest in smaller amounts. You can invest in them for as low as Rs 500 every month.
Myth 4. Fixed deposits are the best
Reality: Fixed deposits are safe and provide guaranteed returns. But fixed deposits cannot fetch you inflation-beating returns.
Myth 5. Bonds are very safe
Reality: This is a common misconception. There are various types of bonds. The degree of risk depends on its credit rating, maturity and interest-rate volatility. Understanding the relationship of price and yield is crucial in this case.
Myth 6. Quick money can be earned from stock market
Reality: Stock market is a great place to make money only if you have time, hard work, patience, discipline and rational approach. There’s no other substitute.
Myth 7. There’s no harm over-diversifying
Reality: It’s true that diversification is the key to investment success. But, over-diversifying your portfolio can dilute the return potential.
Myth 8. All advisors are the same
Reality: There are many advisors like fund managers, investment advisors, financial planners, brokers and insurance advisors; the scope of these advisors differ. The key is to choose the right advisor depending on what you are looking for.
To sum up
Rational thinking and trusting the right information are two key truisms that should stick with you. This can be more than enough to debunk the general myths about investing. Nothing else should matter. People may offer to give advice but it is important for you to sift the truth from the faff.
A number of factors can eat into your pension or retirement pot. These are, typically, medical costs, lifestyle upgrades, assisting children with their education, caring for older people, and most importantly, inflation that can be a huge drain on one's finances.
This means it is even more essential to ensure your invested money is working hard to help you take care of yourself and the ones closest to you. At the end of the day, investment myths are more than disheartening; believing them could prevent you from building the kind of financial plan you require to address lifetime purposes.
Let the myths stay with the storytellers and speak to a professional finance expert to know more about savings and investment plans.