Only about half of all Americans participate in the stock market. Though there are other investment opportunities, the stock market provides everyone with an opportunity to profit from the American economy. Unfortunately, there are many myths that keep investors out of the market. Understanding these myths can help people to take action and start investing.
Savings Accounts Are the Only Safe Place for Money
Many people believe that all investments are risky. While it is true that stocks, mutual fund and bonds do have risks, there are investments with guaranteed rates of returns that are insured. For example, money market accounts and certificate of deposits (CDs) offer a much higher interest rate than a traditional savings account, while also being insured. Many government and corporate bonds also have very little risk. While many people fear the risks of the stock market, the fact remains that the stock market has produced steady gains for decades for long-term investors.
Investing Is Too Complicated
While it is true that investing can be complicated, a person with no understanding of the financial markets can learn the basics in a relatively short amount of time. The basics of how stocks, bonds and other financial investments operate are surprisingly simple. In fact, most investment companies offer automated investments that are set depending on a person’s expected retirement date. These automated investments choose a mix of investments that become less risky as a person nears his or her retirement date.
The Market Is Rigged
Many people believe that the market is more than just complicated, it is also rigged. It is believed that the large banks and wealthy individuals conspire to rob small investors of their money. However, there are a number of problems with this belief. First, the markets are closely monitored by various government agencies and media companies. A media company or individual that could uncover market collusion could profit greatly from exposing the story as well as earning rewards from government programs. The fact that no extensive collusion has been found is a good indicator that there is not a grand conspiracy. Furthermore, most investors who stick to a sound program make money. If the market was rigged, this would not happen.
Not Having Time To Invest
For the average investor, an investment plan should be made and left alone. Aside from looking at quarterly reports and annual rebalancing, investing takes very little time. In fact, over the long run, more active investors are more likely to underperform the market than an investor who just sticks with his or her original plan.
Not Having Enough Money to Invest
In past decades, investment houses had little interest in those without a significant amount to invest. However, things have changed quite a bit. Today, investment houses compete for every customer. Technology has made it cheaper to invest, making it easier for investment companies to welcome small investors. In fact, many investment companies will open accounts with zero down for those willing to set up automatic deposits from their paychecks.