5 Misconceptions About Investments You Should Know

There are so many misconceptions we have in our mind about investment or while making an investment. This article talks about five of the most common misconceptions people have and the truth behind them.

5 Misconceptions About Investments You Should Know

There are so many misconceptions we have inour mind about investment or while making an investment. Todaywe will make you aware more about 5 of the most common misconceptions peoplehave and the truth behind them.

1. Investments areonly for Rich people

Most people believe that investment is only for the richpeople because they have ample amount of money to invest. But the truth is thatno matter what your financial condition is you should be investing some part ofthe money regularly.

A right investment will always benefit us by preserving ourmoney from inflation or taxes and also multiply it over the time. Poor andmiddleclass people need this as much as rich people, so investment is somethingeveryone should definitely do.

2. Investing inStocks is like Gambling

We do believe that investing in stocks can be really riskysometimes. But it is not at all same as Gambling unless you are randomlyselecting stocks. You need to do a proper research before investing.

However, Gambling is a zero sum game, where one will win atthe expense of the other player. But in stock investing, if you select acompany which makes good profit regularly then its win-win situation for allthe shareholders.

3. Investing inmutual funds means you have diversified portfolio

As we all know the importance of having diversification inour investment portfolio. Most of us take the mutual fund route and assume thatwe have a diversified portfolio. As Instead of putting all your money in onestock, a mutual fund helps you to diversify your investment into variouscompanies in a sector of various sectors altogether.

However, the reason of diversification is very different. Aninvestment portfolio which has a good mixture of stocks, bonds, real estate,commodities etc is a truly diversified portfolio.

4. More risk meansmore return

This is one of the most common and a dangerous misconceptionpeople have about investment. Most of the people believe that higher riskequals to higher return, which is absolutely not true.

Risk is inversely related to your knowledge about thatinvestment and the research you have done. You can always minimize the risk bydoing a proper research and expanding your knowledge about that particularinvestment you about to make.

5. Do not invest whenmarket is doing bad

When the market is doing good we see a lot of new investorjumping into the growth story. It looks like if you invest in any stock youwill definitely make money. But when the market is doing terrible most of thepeople believe that it is the worst time to invest.

However in the down market, It is quite easy to find reallyvaluable stocks at a discounted price. World’s greatest value investor WarrenBuffett usually follows that same rule.

I hope you are now aware of some of the most commonmisconceptions about investment and will definitely avoid them when the timecomes. Also, if you are not sure about investments you should take the help ofa leading financial consultant in your cityand get sound advice before investing your hard earned money.