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Debunked: Top Myths About Investing in Stocks

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Debunked: Top Myths About Investing in Stocks

By Stranga The Great
Hip-HopVibe.com Staff Writer

Investing in stocks has been marred in various myths and misconceptions for the longest time. This is partly because of inadequate information among new investors.

Nevertheless, a ton of them remains to be false. Knowing which information to disregard is important for you if you fancy a chance in the stock world.

In this article, we’ll debunk some of the popular myths surrounding stock investments.

Myth #1: Brokerage Accounts are for the Rich

Of all the myths about stock investing, this is the most common. However, it’s a flat lie. Thanks to the growing interest in stock investing and online brokerage accounts, it’s now possible to invest with as little as under $1,000.

What’s more, there are several brokerage companies which don’t have minimum requirements but they’ll want you to deposit every month. Nevertheless, you’ll have to enter into a contract with the firm to specify the exact amount you’ll deposit.

This amount will vary from one brokerage firm to another with some offering $100 every month for the low initial investments.

Myth #2: Buying Stocks Requires a Lot of Money

Another lie. Have you heard of the Dividend Retirement Plan (DRIP)? Here’s how it works. This plan allows you to invest in a company with little money. In fact, with it, you can skip the broker and buy a single share.

The main objective of the plan is to allow you to increase your portfolio over time by buying more stock of the same company. This you can do in two ways:

  • Regular investments – This is more like a savings plan, only this time you’ll set aside monthly contributions toward the purchase of more shares.
  • Plough back the dividends –Similar to how businesses work, the profits you get from the stock should be able to buy you more shares.

Myth #3: Diversified Portfolios are for the Rich

No, they aren’t. Everyone investing in stocks must diversify their portfolio as a way to reduce the overall risk. One of the ways to diversify your portfolio is through Exchange Traded Funds (ETFs).

With an ETF, you can invest in a variety of stocks and with little money. These ETFs always operate with an index which guides them.

However, before investing in stocks, you may want to do your research on the preferred company. This will allow you to know how they’re performing and how their future looks like. You can use stock message boards for this purpose.

 

Myth #4: Penny Stocks are for Beginners; Blue-chip Companies are for the Experienced

Penny stocks refer to stocks trading for lower than $5 and they trade low for several reasons. One is because the company may be new or investors think they won’t last as long.

These stocks are volatile and as a beginner investor, you may want to avoid these stocks. Most of the beginners opt for companies with an extensive history since they offer less volatile stocks.

There you go, all the myths and misconceptions debunked. So, the next time you think of investing in stocks, make sure you ignore this information. In addition, make sure you do extensive research on various companies to avoid losses.

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