Five Biggest Stock Market Myths – Debunked!
There are various myths prevalent in the stock market that keep potential investors away. These misconceptions may prevent you from reaping the immense profits that this market offers. Believing in these myths may influence you to commit mistakes and lead to significant losses.
Therefore, if you are just starting out on your investment journey, it is crucial for you to know the biggest myths that are prevalent in the stock market. Learn about them in detail in the blog below.
What Are the Five Biggest Myths in the Stock Market?
Here are the five biggest myths in the stock market that have been debunked for you:
Myth 1 – The Stock Market is Only for Experts
There is a prevalent belief that the stock market is only for financial experts. This is a myth, as the stock market is open to everyone willing to invest and can serve as a potential means for wealth generation.
However, it is a fact that you must have an understanding of how this market works. This will help you take the right decisions and purchase stocks that will appreciate in value. Moreover, this is a continuous learning process as an individual’s perception develops with time.
Myth 2 – You Can Only Profit from the Market by Investing a Huge Sum of Money
Another prevalent myth in the stock market is that you must have a huge amount of money to start investing. This statement is false, as, in the Indian stock market, one can purchase shares for as low as ₹20. Although it is true that you need to have a reasonable amount of money to start investing, it does not have to be a huge amount.
Myth 3 – Stock Market Investments Always Lead to Losses
This is one of the biggest myths surrounding stock market investments. It is a fact that stock markets are volatile; however, with proper preparation and the right purchases, anyone can generate profits.
Many times, new investors tend to suffer from losses due to a lack of basic knowledge or panic selling. In addition, they also sell off their holdings when faced with short-term volatility.
It is a fact that losses are part of the game. But it is a complete myth that most investments lead to losses. Gaining from stock market investments requires a lot of patience and an understanding of its dynamics. With in-depth research and timely decisions, anyone can profit from this market.
Myth 4 – Stock Market Investments are Equal to Gambling
There are a lot of individuals who consider investing in the stock market akin to gambling. However, it is a complete myth. When one gambles, winning or losing is completely a matter of luck. But, when it comes to stock market investments, many factors, like company history, past performance, fundamentals, etc., come into play.
Opposed to gambling, these factors are not haphazard, and you can easily study them in order to make informed choices.
Myth 5 – Taking High Risks Equals High Profits
In the stock market, there are various kinds of investments that come with different risk levels, and they can reap huge gains for you. However, it is not always true that high risks are equal to high profits.
Many individuals seeking high returns have lost a significant amount of money by entering high-risk investments. If you are a new investor, you must always assess the risks involved before going ahead with any investment decision.
Additional Myths on the Stock Market
Here are some other stock market myths that you should know:
- You Should Take Chance with Stocks
This is a complete myth. You should never take chances when it comes to investing in the stock market. It takes a lot of preparation and research to make successful trades, and if you do not have the required time, you can take the help of a financial expert.
- Once a Stock Goes Down, it Doesn’t Come Up
Another prevalent myth is that once the price of a stock goes down, it does not come up. This is not true most of the time, as the stock market is cyclical in nature. The prices of shares will appreciate and fall in a cycle based on various macro and microeconomic factors like company policies, business cycles, investor sentiments, political and social events, etc.
These were some of the myths you should stay aware of while investing in the stock market. Doing so will ensure that you make informed choices and take advantage of the immense amount of opportunities that this market has to offer.
Frequently Asked Questions
What should I remember before investing in the stock market?
Before investing, you should make sure to buy and sell shares at the correct price, not to take rash decisions, focus on long-term growth and diversify your holdings.
What are the key points for a successful investment?
The key points for a successful investment are – creating a tailored investment plan, assessing the right level of risk and actively managing your investment plan.
What are the types of stocks based on market cap?
Market capitalisation, or market cap, of a company represents the total value of its outstanding shares. Based on this factor, company stocks can be divided into small cap, medium cap and large cap stocks.
Is it possible to buy shares without a Demat account?
No, practically, it is not possible to buy shares without having a Demat account.