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Investing in Your Knowledge: 3 Common Stock Market Myths (And the Stock Market Facts Behind Them)

January 03, 20242 min read

A survey by Ally found that 61 percent of adults say that they think investing in the stock market is scary. That is an extraordinarily high number, and a dangerous one too. If people are scared to invest, it can harm their financial health and futures.

That's why in this article we'll be breaking down some of the most common stock market myths out there with some hard stock market facts. Knowledge is power (and in this case, also money).

1. Investing in Stocks is for the Rich

The most common myth out there is that buying stocks is something only the rich and famous do. That's not true at all - in fact, many investing apps exist designed to help you get started investing with your spare change, like Acorns.

Investing any extra money that you have can help you build a nest egg over time. Since you can reinvest dividends, even small but constant contributions can turn into a substantial portfolio over a period of months or years.

2. Stocks Only Increase in Value

The stock market is a volatile investment vehicle. This means that the values of stocks frequently go up and down. It also means that there is no limit to how high or how low an individual stock can go.

Of course, in general, the stock market has returned an aggregate positive return of 10 percent a year - though individual stocks go up and down. However, you can still make money from stocks going down in value if you've shorted them, so that volatility isn't necessarily a bad thing.

3. It's a Stock Market Fact That You Should Buy Low-Value Stocks

While the maxim "buy low, sell high" makes a certain sort of sense to everyone, in reality, there are usually quite a few reasons to avoid low valued stocks. Companies that have fallen in value usually have done so for a reason, either because of poor sales, mismanagement, or some other form of financial issue.

Seeing a company dip significantly in value isn't always an indication that you should start buying it. Publicly traded companies can declare bankruptcy, which can reduce or even eliminate your investment.

On the flip side, it often makes sense to buy stocks that have risen in value. This usually points to investor confidence, as well as good performance. Of course, you should always do some digging into the news and financials yourself before you put money in.

You Should Always Do Your Research

All of the above stock market facts should help ease any fears that you have about investing. However, they're not to say that you should hop in right away. You need to do your research and pick which stocks you think have value (or which ones you should short) over the long term.

For more information about developing your own specialized investment strategy, get in touch with us.

David

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