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The Top 4 Myths About Trading and Investing

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Message Justin Weinger

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If you're over the age of 20, chances are you've heard most of the myths listed below. Unfortunately, all four of them are still in wide circulation even though it's pretty easy to debunk them in about 10 seconds. What do they all have in common?

Two things: first, they're all related to investing in some way. Second, all are based on one or another kind of fear. It's interesting to realize that a vast number of adults have a fear of investing in anything. Likewise, many were told by parents and grandparents that the securities markets are extremely dangerous places to park money. The bright spot in this litany of complaints is fact. We investors have the truth on our side and it's about time we use it to shoot down falsehoods and half-truths. Here are the big four myths.

All Investment Choices are Equally Risky

Here's one you hear at bus stops and diner counters. Usually, it's spouted by people who have never placed any of their own money at risk, know zero about the stock market, and seldom take part in financial transactions more complex than credit card purchases. Every major investment category comes with a varying degree of risk. Government bonds, corporate bonds, and blue-chip stocks are on the low-risk end of the spectrum. On the high end are things like real estate, collectible art, and energy futures.

Day Traders Lose All Their Money 99 Percent of the Time

This is the newest of the big five myths, probably because day trading for non-professionals has only been around for a couple of decades. Many new day traders do lose a fair amount of money, but they often drop out of the pursuit and take up swing trading or long-term investing as an alternative. The point is that day trading enthusiasts who learn to minimize losses by doing research and taking their time at the craft usually stick it out. It's a high-octane profession and entails a risk-reward ration akin to commercial real estate, flipping houses, and collecting classic cars, yet no one bad mouths flippers, real estate mavens, or car collectors. For some reason, uninformed people enjoy bashing the profession of day trading.

It's Smarter to Keep Cash and Gold Bullion Than Stocks and Bonds

Cash loses value in direct proportion to the rate of inflation. Gold fluctuates based on dozens of economic factors. A quick look at historical charts shows that bonds and corporate stocks often out-perform bullion and cash.

Government Savings Bonds Will Make You a Millionaire

This myth is the last grasp of the straw for people who are phobic of the securities markets. Yes, government bonds can make you a millionaire if you start saving at a very young age, put most of your disposable earnings into them, and have a bit of luck on your side. The truth is that a diversified portfolio of bonds, stocks, and other types of investments will usually get you across the millionaire line much faster than slow growth bonds.

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Justin is a 40 year old father of 3. He has a passion for content, home improvement projects, and interacting with others via blogging.

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