In this article, we will see some of the most popular stock market myths but before that, let’s see some stock market basics.
Have you ever had a dream of becoming an owner of a company?
Yes, we all do have that dream in our life.
If I say you can partially fulfill your dream, then what will be your reaction? But believe it or not, I will make you believe through this article.
What is a Stock Market?
A stock market is a place where buyers meet sellers. The buyer is one of us, and the seller is the company owner who sells the shares of that company.
For this, the company must be listed publicly on the stock exchange. There are mainly two stock exchanges in India, the Bombay Stock Exchange, and the National Stock Exchange.
Earlier, the stock market was limited to some big businessmen, but now, most of the investors are of the middle-class section. Also, historically, people have to go to someplace to buy, sell, interact, and transact by completing paper works, but with the new technologies, now everything has become convenient, and you can easily do all the transactions online.
When you buy a stock of any company, you are the company owner as you are holding some part of that company. Hence, it is important to choose the right shares with proper research and knowing the past and financial condition of the company you are going to invest in.
How does a stock market work?
Consider this when you buy a company’s share, you become one of the fundraisers for the company. The companies who list them on the stock exchange want to meet their needs and require money for their growth and development; hence, listing them publicly helps get funds to raise the capital and growth of the company.
Two things can happen now, the company will do according to their expectation, or the company fails to do so.
In both cases, investors are directly affected by the impact the company faces. So, if the company does well, the investors earn profits for being the shareholder of that company, and on the other side of the company suffer a loss, the investor has to bear with a loss in the capital.
The company makes sure to provide price transparency, liquidity, and fair dealings to the investors. Also, they provide low rate shares so that more people can purchase the shares and more involvement of the public helps raise more funds for meeting the needs.
The stock exchanges also provide the investors with the complete details of the companies listed like their information, financial conditions, previous values of stocks, past performance, and much more additional information required by the investors to better know about the company. This also helps the investors to make a better decision to choose the best stocks for the investment.
To learn more about the stock market, it is advised to join a stock market course from a good institute. It will help to earn handsome profits.
Many reasons stop a beginner from investing in the stock market, and one of the most common reasons is the stock market myths that are spread in society.
Let us see in detail the stock market myths in the next section.
Stock Market Myths
A myth is unreal and fake, but because people believe in them without researching and knowing the reality, it feels real and true.
When it comes to the stock market, it is full of myths. In India, before investing, we have a habit of thinking a lot, and if we come to know that our investment will be a failure, then we usually quit even before trying.
People with great knowledge and research also tend to make a bad investment because of the stock market myths. So along with the proper knowledge of the stock market, you should also know the stock market myths and try to avoid them making an impact on your investment.
Now, let us see the most commonly known and believed stock market myths.
Stock market investments are similar to gambling
This is often said by those who either don’t know the market or have lost their capital in it. So, in frustration, they spread this belief.
According to such people, the market looks dangerous and unpredictable.
In reality, the investments are not gambling and are just the opposite of it. Unlike in gambling, where one person’s loss is another’s gain and vice versa, whereas in the stock market, if you lose, then your money is not given to anyone, and if you win, you are taking anyone else’s hard-earned money.
Also, you require great research, knowledge, and planning before investing in the stock market.
You can understand it by comparing it with driving, saying things like “driving is dangerous”. But in reality, with formal learning, license, and practice, you can easily drive.
For average investors, investing is pretty hard
First of all, no one is average. It is the time and choice that matters.
You can either be a great or a beginner. Great are beginners a little ago, but with proper understanding, experience, and time you become a great investor.
No one knows the future, so if you invest in some company, there may be chances that the company does well, and you earn great returns. On the other hand, a big investor may lose if his company did not perform as per expectations.
There is no better way of investing and learning than making real investments. It doesn’t matter how much theoretical knowledge you have; at the end of the day, the experience is all we get.
It is only possible to earn by investing lots of money
One of the popular myths is that many people think not to waste time and step back without even starting.
It is easy to say that only a lot of money gives you a good return. But in reality, it is not at all true.
You can even start to earn with a little money and also, there are many advantages of investing lesser amounts.
The main advantage is that you are free from tension, as you don’t fear losing. Even if you lose, then the loss is bearable as it won’t affect your financial condition.
You can anytime invest big after earning a decent amount from the stock market. But once you start with a big loss, then my friend, it will be really hard to make a comeback as you will be mentally frustrated, and this may leave a lifetime impact on your mind before making any further investments.
It is possible to earn with a little knowledge
The biggest mistake that beginners often make is they think they have little knowledge, and they start investing directly without any research, past performance, pros, and cons of choice.
It is advised to join a stock market course from a good institute to learn everything about the market, be it the basic terminology or the advanced side.
I recommend you to join The Thought Tree as it is considered a great choice for beginners.
The Thought Tree provides a practical analysis of the stock market and covers every bit of it. Along with this, the teacher shows live trading and teaches how the current market is changing.
The main part is the knowledge that a student gets after completion of the course. You start earning during the course duration itself, and after the completion of the course, you can even make more than what you could have working for 10 – 12 hours at some office.
Following your instincts while buying and selling
It is rubbish as how can you trust your feelings and how can feel change the stock market.
This is the worst decision, but many people are still in the trap of this myth.
People think like a stock will go up following their instincts and end up with a loss.
Emotions should always be kept away from investing as they highly impact your decisions, and you are likely to lose rather than winning any returns.
This myth doesn’t even make sense, and I don’t know why people blindly follow their emotions and work accordingly without even thinking once about the reality of the market.
Higher Risks = Higher Returns
The equation mentioned above is mostly talked off while we learn about the stock market. But is it true?
The equation satisfies 1 out of 100 times, or the percentage is even less. It is not fake, but you should have a lot of money to lose before getting this equation fulfilled if you want to confirm.
You can imagine the amount of loss before getting the high risked profit, and at the end of the day, the total loss will always be greater than the total profit earned in this case.
You may hear big people in business making such an investment, ask them how much they have suffered before achieving this goal. The reality is always hidden behind the doors, and the cruelty is spread in the form of a myth.
This kind of myth attracts many beginners and youth to make a wrong choice and directly impact their financial condition.
You should choose what people are choosing
It is never recommended to go with the herd. Always remember to do something big; you need to go with a different approach.
Also, never listen to anyone as no one will like you earning. Once you step into the stock market industry, don’t look back, and learn from your mistakes is the biggest key to becoming a big investor.
No one has seen the future, so it is all the predictions people make and need not be true.
So, let your mind decide the right choice for you with proper research about the company, the company’s financial condition, and the company’s past performance. These factors will make you a better result, not the herd mentality.
The stock market is highly volatile; hence proper and complete knowledge is required before stepping into this field.
Listen to everyone, but do what you’re learning and what your research says.
Never believe in these so-called myths as they will only waste your time and are never true.
I hope the article was useful and you got to know the secret behind these myths and the reality of the stock market.