The stock market can be a scary place to invest your hard-earned money, but let me try to put your mind at ease. All too often, people are faced with investing myths and exaggerations that end up discouraging them from taking action.
Don’t let these myths hold you back; there are great opportunities out there for shubhodeep prasanta das long-term investors. Here are two of the most common myths that investors believe when they first enter the market and how to combat them.
The Market Will Go Down Forever
While the stock market did have a huge run in the early 2000’s, it hasn’t been an “unstoppable force” as many believe. What happened was that the U.S. economy went into recession in 2001 and then the stock market continued to rally ahead of the downturn.
This is a pattern that repeated in the 1970’s, 1980’s and early 2000’s, which allowed many people to believe that it was going to happen again. When the financial crisis hit in 2008, people had flashbacks of how it happened before and so they sold everything. But there were no indications that this was going to happen again. It just feels like every time you want something for nothing, someone comes along and hits you with something for nothing. But you can’t let that happen- you need to be disciplined and keep in mind that the stock market isn’t an unstoppable force.
High Risk = Higher Returns
Many investors are led to believe that they need to take on more risk in the stock market to earn a better return. While there’s some truth to this, it isn’t always right. In fact, most asset classes over the long term have earned less returns when they are taking on additional risk. That’s why it pays not only to diversify your portfolio but also to invest for the long run and compounding will help you earn your money back more quickly.