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Dec-15-2018
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Five Stock Investing Myths You Need To Bust Right Away!



Investing is normally considered to be a complex exercise. Most individuals feel that investing is not their cup of tea and tend to push off the activity. They instead choose to keep their funds idle or put them in fixed deposits. However, given the long term attractiveness of equity markets, it is quite clear that no other avenue can provide such handsome returns. This is especially true in case of a developing economy like India which has still a long way to move up on the curve of economic progress. This means that the individual investors need to actively seek opportunities to participate in this long term growth story and shun away common investing myths to their advantage.

Here is a quick look at the common equity investment myths:

I think it’s too late to start investing: Remember that it is never too late for a new beginning. Whether you are 20 year old and just out of your college or whether you are in your 40’s and in the middle of your career, it just does not matter. Even after retirement, you can think about investing for yourself and your family.  In fact, by not investing, you are taking the biggest risk of letting a lot of profitable opportunities go by. They key to successful investing is discipline and commitment. Rightfully allocating a proper amount for stock investing would ensure that you work around with your risk taking ability and would help in letting go of the anxiety.  

I feel I do not have sufficient income: This is a common assumption a lot of individuals tend to have when it comes to their finances. However, remember that to create wealth in the stock markets you don’t have to jump in with a hefty amount at one go. In fact, it is always advisable to start investing early despite the level of your income given that the time factor plays a key role in shaping up your wealth over a long term. All you need to do is inculcate the investing habit and then keep investing consistently over a period of time. Systematic Investment Plans (SIPs) are the best way out for such investors

I think stock markets are akin to gambling: Please understand that investing in equity markets is vastly different from speculating. Stocks will be like a gambling only if one engages in high risks like trading penny stocks, leveraged trading, buying and selling based on rumors etc. Identifying good quality stocks and holding onto them for a long period will ensure that you create wealth rather than destroying it.

I have no basic knowledge of stock markets: Online equity trading has become extremely convenient and user friendly over the years. This has primarily been made possible due to the rampant and fast paced changes in technological support for the financial industry. The Smartphone revolution, the advent of apps and the sheer increase in the financial news coverage via television channels, broker websites, news websites and blogs are leading to increased awareness about the equity markets in India.

I invest only when markets fall: While it is correct that buying stocks when the prices dip is a good idea, simply adapting this strategy could not be very wise thinking. The biggest mistake common investors tend to do is buying bad stocks on dips. This can turn precarious particularly in case of major corrections in broad markets which tend to pull even good stocks lower. The key is focusing on the future rather than buying a stock only because it is down say 10 or 20% in a week or so. Investors need to analyze the earnings, news updates and peer group companies before deciding to buy a particular company. Remember that it makes sense to buy a quality stock at high valuations that buying a poor stock at cheap valuations.

Conclusion:

A recent update from International Monetary Fund (IMF) confirms that India is a source of growth for the global economy for the next few decades. India now contributes, in purchasing power parity measures, 15% of the growth in the global economy, next to only China and the US. The IMF views India as a long run source of global growth and noted that the country has three decades before it hits the point where the working age population starts to decline. These factors augur well for the domestic share markets and it is likely to offer plenty of opportunities to generate staggering amount of wealth over the coming years. In fact, with the continued increase in equity investment flows via the mutual funds from retail investors, it can be concluded that individuals are quickly getting over investing myths and are quite keen to engage in stock markets.

Blog by: Mr. Dhruv Ajmera

Also Read: Margin Trading: Here are a few useful tricks and tips
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