Stocks: Distinguishing Facts from Myths

While a lot of negative things are being said about stocks, investing is still a pretty lucrative endeavor. People who invest their time, effort and resources are sure to benefit greatly from it. However, your effort would all go to waste if you do not have a clear understanding of stocks and their basics. Likewise, it would even be much more difficult if your judgment is clouded by myths surrounding the stock market.

That’s why it pays to be educated on stock market myths and facts.

Myth: Decreasing stock will stop soon

Fact: While most stocks do seem to recover, it doesn’t necessarily follow that all of them will. That’s why you shouldn’t assume that stocks on a downward trend will soon pick up. Much research is still needed to preempt whether it is time to buy or sell. This is because there are tons of factors that affect stock price. This could be reduced growth, internal conflicts, negative PR and many more.

Myth: Increasing stock will fall soon

Fact: Similar to the first myth provided, the opposite would also hold true. If a stock seems to be gaining vastly, some people fear that it will level or drop soon. This causes them to stop investing and go on panic selling. While that is indeed a good idea if you have a high profit margin, this could amount to a larger sum if only you investigate the factors behind this. If the market sees this company as one that will grow substantially, its stock price may continue to grow for who knows how long.

Myth: You can fall into huge debt when your endeavor fails

Fact: You can definitely lose everything but that would only cover what you have invested. Simply put, you can’t lose more than what you have invested. It just doesn’t work that way, not unless you took loans out to finance your investment. In that case, you will definitely owe more than you have invested. This is a bad practice though and shouldn’t be followed. Only invest what spare money you have unless you are pretty sure of yourself and the company you are investing in. Taking a loan out to invest in the stock market is like doubling down on blackjack after all.

Myth: Buying and Holding is a bad idea

Fact: Your brokerage firm will definitely say this. Buying and holding stock for several years is indeed a slow way to make money but it’s sometimes the only viable way for some people, particularly those who have little time to monitor the market on a daily basis. In a similar way, it is also a slow way to lose money. Who knows how much the stock you are holding will change after 2 years? It’s up to you. If you are merely in the game to earn dividends or support a company, by all means, hold your stock.