Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
7 Common Investing Myths Busted!
Ruby Layram
12th Jun 2024
More than 3 in five people in the UK have no investments! This means that there are millions of UK adults who are yet to brave the market. One of the biggest barriers to investing (for many people) is the common misconceptions that people have about risks and eligibility. Investing myths are everywhere! And, they are stopping a LOT of people from making the most out of their cash.
At MoneyMagpie, we’re passionate about getting more people into investing. So, we wanted to take the time to do a bit of myth-busting!
In this guide, we will bust 7 common investing myths that you may have heard of (or even fallen for).
- Myth #1: You have to be wealthy to invest
- Myth #2: Investing is riskier than saving
- Myth #3: You have to lock all of your money away
- Myth #4: You have to pick ‘winners’ only
- Myth #5: You have to watch your investments every day
- Myth #6: You have to time the market to be successful
- Myth #7: Only experts make money from investing
Let’s get straight to it! Here are 7 common investing myths and the truth behind them.
Myth #1: You have to be wealthy to invest
The first one is a big one!
‘You have to be wealthy to invest’ is something I hear all the time. However, it is far from the truth.
In fact, investing is one of the best ways to improve your personal finances and build wealth for yourself. It is what many millionaires use to go from regular working professionals to seven-figure wealth-building pros.
You don’t need to have loads of money to invest. But, you do need to have money that you can afford to lose.
There are many online platforms that allow you to invest from as little as £1. I personally like eToro which has a minimum deposit of $20.
**Your money is at risk.
Dollar-cost averaging is a popular strategy that involves investing small amounts of money often. This is a good option for people who don’t have huge lump sums of money to put into their investing account.
Myth #2: Investing is riskier than saving
This one might be a little surprising.
A lot of people assume that putting your money into a savings account is less risky than investing it. However, this isn’t always true.
The value of savings can actually go down over time because of inflation. So savings accounts aren’t always as ‘safe’ as they are made out to be.
Investing can come with a similar risk level to saving if you choose low-risk assets and employ proper risk management. Doing this will minimize your chances of a big loss whilst still allowing you to profit from potential gains.
The gains from investing are typically a lot higher than the interest that is paid out by a savings account. So, by investing wisely, you could increase your profits without exposing yourself to too much risk.
Myth #3: You have to lock all of your money away
If you’ve worked hard to save your money, the thought of locking it away can seem pretty scary!
Despite common belief, investing doesn’t always require locking away your cash. Instead, many investments are pretty flexible and can be sold at any time during market hours.
Of course, there are some exceptions here. For example, Lifetime ISAs come with a penalty for taking out money before you buy your first home or retire. Any investments with a ‘fixed term’ will require locking your money away.
However, fixed-term investments make up only a small corner of the market. There are plenty of other investment options, such as Cash ISAs, and ETFs, that allow you to take out money whenever you like.
Myth #4: You have to always pick winners
A lot of people get intimidated by the pressure of always picking ‘winning’ investments (investments that go up).
In an ideal world, it would be possible to predict the market accurately and know exactly what assets will go up, and which ones will go down. But this isn’t possible.
Every investor will make an unlucky choice here and there – even Warren Buffet!
Instead of worrying about always choosing winners, focus on creating a balanced portfolio that contains both winners and losers. Obviously I’m not saying that you should purposefully choose assets that will lose money. However, you should focus on diversification and following a strategy rather than always going after the next NVIDIA or Bitcoin!
The idea is that winners will cancel out any losses that you see from losers. As long as the majority of assets in your portfolio perform well, you should see some profits.
Myth #5: You have to watch your investments every day
Another common investing myth is that you have to watch your portfolio every minute of the day. How boring does that sound!?
Luckily, this isn’t the case (unless you try day trading which is very risky and most suited to advanced professionals). As a long-term investor, you should be able to let your assets sit in your portfolio and accumulate over time. There is no need to watch them every day.
I recommend assessing the performance of your portfolio every couple of weeks. It is also a good idea to check how things are going during big economic events or announcements.
Checking your portfolio every single day puts you at risk of emotional decision-making. It can also affect your anxiety levels. This is because, by checking your portfolio daily, you are likely to see fluctuations that can be a little scary. It’s normal for stocks to go up and down throughout the financial year – even the best-performing stocks have ‘red’ days!
By only checking your investments every now and then, you can avoid worrying about the occasional bad day and stick to your strategy.
Myth #6: You have to time the market to be successful
It is a common misconception that there is a ‘right time’ to start investing.
A lot of people believe that it is possible to time the market and invest while stocks are available for a very undervalued price.
This is called value investing and it is a popular strategy that can be very effective. However, value investing takes a lot of practice and market knowledge. It can take years to become a good value investor!
Luckily, you don’t always need to time the market to be successful. If you create a diversified portfolio, you should be able to sustain long-term growth no matter when you start.
In truth, there is never a ‘right’ time to invest. But, it is possible to start too late! In my view, the sooner you start investing, the more time you will have to get good at it!
Myth #7: Only experts will make money from investing
A lot of people think that you need to be a financial expert to make any money from investing. But this isn’t true!
Anyone can invest and learn how to do it effectively. You don’t need to be an expert but you do need to:
- Understand basic investing jargon
- Create an investing strategy
- Understand how to minimize risk
I recommend taking a few beginner investing courses to get yourself up to speed before you start. You don’t need to know anything too complex but, it is helpful to understand the basics!
Another good option (but slightly more expensive), is to seek help from a financial advisor who will be able to offer insight into different strategies that could suit your long-term goals.
Are you interested in learning more about investing? Why not sign up to the MoneyMagpie bi-weekly Investing Newsletter? It’s free and you can unsubscribe at any time if you find it isn’t for you.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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