Think You Need a Fortune to Invest? These 5 Myths Prove You Don’t

With the ongoing feud between Elon Musk and President Donald Trump continuing to play out in the public eye, Tesla stock dropped another 14%. The fallout between the two business tycoons included threats from President Trump to terminate billions in federal contracts with Musk’s companies. Meanwhile, Elon Musk has suggested that President Trump should be impeached, and Tesla lost roughly $152 million in value in a single day.

When market conditions get as tumultuous as they are right now, investment myths spread like wildfire. Whether it involves people comparing investments to a trip to the casino or believing that the only way to succeed is to adopt a Wolf of Wall Street mindset, stock market myths abound during periods of market volatility. These myths not only keep some investors on the sidelines, but they also impact how others manage their investment strategies.

Technology has changed the way that we do everything, including investing. Modern investment platforms have torn down the barriers that used to stand between new investors and the stock market. In the past, the stock market was only available to savvy traders and people who had access to advisors. Today, you can start investing small and build your net worth over time while learning how to invest on the fly.

With all of this in mind, let’s look at some common investment myths and consider the long term investing truths behind them. Doing so allows you to overcome these stock market myths while you build your portfolio. Investing in the stock market doesn’t guarantee success, but when you go into it with solid, sound information, you can make informed decisions that make success more likely. Let’s get into five stock market myths and the investment truths behind them.

Myth #1: You Need Financial Experience to Get Into Investing

Every successful investor was once a new investor, which debunks this beginner investing tip. Many people assume that they need some sort of experience before they start buying and selling stocks, but that’s simply not the case. While some level of training may have been necessary in the past, advances in technology have made it possible for everyone to start investing if they’re interested in getting into the game.

In a society in which you can buy virtually anything online, you can purchase stock in a company with as much ease as placing an order on Amazon. You don’t need an economics degree or years of experience on Wall Street. Instead, you need some money to start with an app on your phone, and the willingness to do a little research.

According to Commonwealth, a nonprofit organization that focuses on helping people build financial security, a poll of 800 new investors showed that 71% of them reported that investing was easier than they thought it would be. Of course, this doesn’t mean that 71% of them became multimillionaires through savvy trading. But it does mean that they were able to accomplish some sort of success, even though they weren’t experienced.

To make things even easier, many online platforms offer educational tools that you can use to learn as you go. Once you’re comfortable, some of those platforms even allow you to set up automated investments that allow you to expand your portfolio without having to do much work at all.

Myth #2: You Have to Be Rich to Start Investing

When you think of investing, you may think of people in expensive suits running around on the floor of the New York Stock Exchange. However, you don’t have to be wealthy to get into investing, either. This myth is largely based on an outdated reality. Years ago, it did require a lot of money to get into investing. Many brokers had no interest in working with people who only wanted to spend a couple of hundred dollars, which left people who didn’t have thousands on hand out in the cold. However, today, the same apps that allow you to invest without experience allow you to start investing with very little money.

According to experts, today’s most popular retail brokerages offer no-fee, fractional share investing that you can get into with as little as $1. With this change in the landscape, many traditional brokers have had to change their business model, opening their doors to people who aren’t bringing thousands of dollars to the table. That’s great news for you if you’re just getting into the world of investments.

Platforms like Wealthfront allow you to start investing with $1, while Acorn, a wildly popular platform, has a minimum amount of only $5. They allow you to buy fractional shares of a company, which means you can slowly build your account balance. While 1/10 of a share of stock in Apple may not be worth much, if you’re willing to wait things out, you can build money that you can then use to buy whole shares at a larger clip.

Myth #3: Investing Is Just Like Gambling, But With Extra Steps

People who don’t have experience in investing, or those who have tried and failed, often say that investing is no better than gambling. Some people who have tried their hand at the stock market but haven’t seen the results they wanted often speak from a place of frustration. However, investing is not the same as going to Las Vegas and putting all of your money on red. Investing, even at its most simplistic, basic level, is a skill. Fortunately, it’s a skill that you can develop over time.

Ultimately, equating investing and gambling severely undermines just how markets work. When you gamble, you have no control over the outcome. When investing, you’re making an informed decision based on past performance along with future projections. That’s far different than telling a dealer at a blackjack table to give you another card.

Successful investing, while not a guarantee, is far more likely to produce a positive return than gambling is. To say that there’s no difference between the two is simply untrue. While you may consider it a gamble to invest money in an upstart tech company, the fact remains that you can look at the performance of other tech companies to at least go into the transaction with some level of information and assurance.

Myth #4: If You Want Big Rewards, You Have to Take Big Risks

“You have to spend money to make money.” Statements like this paint a picture of someone clearing out their life’s savings in order to buy stocks in a company that they’re hoping performs well. While it’s true that you can’t get stocks for free, the truth behind this investment myth is a bit more nuanced than a single statement that focuses on the size of your rewards.

Overcoming this myth requires you to go into the transaction with a bit of realization. The odds of you “striking it rich” based on a single investment are not good. The most successful investors in the world are those who hedge their investments, diversify their portfolios, and make informed, educated decisions.

Ultimately, the correlation between big risks and big rewards comes down to how risk-averse you are. You don’t have to make dangerous, reckless decisions with your money to build a successful portfolio. In fact, taking too many risks is far more likely to leave you in the red than it is to push your portfolio over the top.

Myth #5: Cash is Safe, But Stocks Are Dangerous

On the other end of the spectrum is the belief that having cash is safer than having stocks. On the surface, this looks like a true statement. After all, when you have cash in an account that bears interest, you know that you’re not going to wake up one morning and find that your cash is worth less than it was when you deposited it. However, this doesn’t mean that investing in the stock market is dangerous, at least not if you do it correctly.

Building up a huge supply of cash is safer than stock, in the sense that your money isn’t going to vanish. However, the money that you invest today likely won’t have the buying power in the future that it has today. That fact presents its own set of dangers. Do you sit on your cash in the name of protecting it, or do you put it to work for you so it can multiply?

Debunking these myths about investing is an important step in your financial journey. When knowledge is power, which is the case when it comes to investing, debunking common investment myths is crucial.