Since there is this sharp distinction, investments are probably somewhere in the grey area, subject to a lot of misunderstandings.
In this article, we are going to explain several myths people believe regarding investments.
But before we delve into the “Instagram vs. reality” division, let’s see what falls under investments.
We have turned to the investment master, Mr. Phil Town, who knows a thing or two about the craft, him being an investment advisor and hedge fund manager.
Investment Types
- Stock market. Considered the best investment type that brings back profit, but you need to learn the basics of managing investments.
- Because of the level of risk, or lack of it, for that matter. A safe investment, some may think. Maybe, in discourse terms, but in reality, but the return rate might be so low that over time you realize that inflation ate your money- it may be the same amount that you invested, but it is not worth the same. Reconsider safety here.
- Mutual funds. You invest money with other people into a lot of different assets, but the bottom line is that you pay money to the managers of your money without ever reaping the benefits, i.e. monetizing from the whole business.
- Houses and buildings, i.e. real estate. Mind you, almost the only good deal here is to buy property for half of its worth. Otherwise, you are about to take care of a lot of rental space with fewer returns. Better invest in the stock market, Town advises.
- Precious metal or stone, like gold or diamonds. The rule of thumb is to invest in the said commodity only in case you are sure the world is going to run out of those goods, making their shortage its driving force.
Investment is not a big bad wolf waiting to eat you, it’s also business, so consider building a website, as well. Turn to the experts and creative visionaries from TuiSpace, a Houston-based digital agency. Also, you need to learn a lot about the postulates of investment before you decide where to put your money. Maybe this article helps.
Here are some common myths around investments- this straightforward, yet complicated endeavor.
Expectations vs. Reality
Since we said the stock market is the safest and easiest bet, let’s start with the expectation around it:
#expectation No.1: The stock market only skyrockets.
#reality: Pray for a stock market not to plummet when you are about to retire because you never know when it’s going to happen. But! Whenever it happened, afterward it did skyrocket: the returns almost doubled.
#expectation No.2: Investments are easy money.
#reality: You can earn a lot from thoroughly thought-out investing, but it takes time. A lot of time and stamina. It’s about efficiency, not the short-cut approach.
#expectation No.3: Buy a stock for less amount of money and it will immediately go up.
#reality: it ONLY happens if the firm is exquisite. As we mentioned above about the housing and property, it is worth an investment only in case it’s purchased on sale in comparison to how much it is really worth. And yet, if the company has already faced the slump, who guarantees you that it won’t happen again? We don’t claim they won’t go up, but it might not be a linear or definite road. Nevertheless, if this is a sound firm, in the end, it should acquire its real value. It is volatile in the short term, but eventually, if you are strong enough to endure the ride, you’ll earn.
#expectation No.4: Turn to investments and you may as well quit your day job.
#reality: It turns out that working until you retire is real. But with investing, it means that your retirement might come quicker, and will most certainly be more relaxed than others’. Precisely, much more relaxed. But do keep your 9-5 job, after which you go about exploring the stock markets and watch your revenue grow.
#expectation No. 5: The faster a company’s growth, the better the investment
#reality: It is not the only predicament of its value, there are other things to consider. It could be over-valued since a lot of other investors are probably also eyeing it and bidding for it. Moreover, it might have a sudden decline in growth and quality as well, which is common.
Conclusion
You might have heard a lot more phrases and predictions around investment, including those of return rate hitting the double-digit, or diversifying to reduce the overall risk, which, if done clumsily, may take you to over-diversifying and losing a lot more.
Learn every aspect of the subject matter, or hire an advisor- it will pay off in the long run.
Better have fewer solid stocks, than myriads of potentially money-wasting ones. Keep a keen eye on the good ones.
And remember this notorious, much-quoted phrase: “Past results are no guarantee of future performance”. It is there for a reason.