There are a number of myths associated with investments and its time they are debunked for you. You can avoid being a failed bankrupt investor and can go on making a fortune out of investing.
Myth # 1. You need to be excellent in mathematics
In the words of Warren Buffet “Success in investing doesn’t correlate with IQ once you’re above the level of 125. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” You need not be a mathematical genius for being a successful investor. Just a sharp edge for observation coupled with common sense and daring guts can make you the next Rakesh Jhunjhunwala.
Myth # 2. Investing in share markets is the easiest way to succeed
This is one of the most common misconceptions most investors suffer from. Stock markets generally reward those investors who are plying in the long term investment scenario. Stock markets channelizes the funds from greedy and fearful players to the more balanced and patient ones. Being disciplined is of utmost necessity while investing in stock markets. Being smarter will not help you. You need to be extremely balanced and patient for succeeding in the stock market.
Myth # 3. Diversification follows the motto of ‘The more the better’
Diversification is of immense importance when you are investing. 10 stocks and 3 mutual funds can be regarded as a well-diversified portfolio. But having a too diversified portfolio will do nothing but diluting your returns from your investments. When you have diversified your portfolio, you are no longer investing only in the best stocks and funds. You are also investing in the not so good ones. This will bring down your net returns from investments. You can have a well-diversified portfolio by investing in a few guaranteed stocks and funds rather than buying everything in the market.
Myth # 4. Always invest in ‘What is Hot’
Investing in ‘what is hot’ implies that you are investing in what most people are. That means you will never have extra ordinary returns and your investments will yield very average returns. Be greedy when other investors are being fearful and vice versa. Thus you are advised not to follow the hot pick of the month when you are deciding what to invest in.
Myth # 5. Saving taxes is the only positive from investments
Most investors are driven in their investment decisions by the opportunity of saving taxes. By doing this they will be mediocre investors who will never achieve anything beyond the petty target of tax savings. The intelligent set of investors will look to save tax from investments along with other benefits like retirement plans and children’s future plans. Always check to find out which group of investors you belong in and take your decisions accordingly.
By avoiding these myths you can be assured you have made the right start for being a successful investor and thus be a tier above those investors who incur loses or average returns from the savings.