A lot of people want to start investing – but some of them do not move past the idea stage. Sometimes that can be because of a misunderstanding that is holding them back.
Here are three stock market myths, debunked.
Myth 1: it takes a lot of money to invest
One reason people put off getting into the stock market is the idea that it takes a lot of money to start buying shares.
That simply is not true. Indeed, one of the things I like about share ownership is that it can be tailored to an individual’s personal financial circumstances.
But do watch out for this!
Having said that, small amounts invested can mean a proportionately higher impact from minimum costs and dealing charges. So it pays to compare options when selecting a share-dealing account, Stocks and Shares ISA or trading app.
Myth 2: investing’s just for experts
Another misconception that puts some people off investing is that it is something only experts can do. In fact, I reckon someone who is not an expert but is willing to take some time to learn about how the stock market works and research shares can be ready to invest — and potentially invest successfully.
Something that can help is sticking to things you understand. For example, I own shares in Greggs (LSE: GRG). The business model is fairly straightforward and I can get my head around it. With thousands of shops, I can also get my own view on how Greggs seems to be doing as a business easily enough by popping into some.
Such ground research can be helpful, but it is only one part of successful investing. It is also always important to know about things like how much debt a company has and what its cash flows look like. Those things can be found in a company’s financial reports.
One mistake some people make when they start investing is thinking that a good business must automatically be a good investment. But that is not the case: what you pay for shares matters.
I liked Greggs as a business for years, but the share price was too high for my taste. The last year though, has seen it fall 24%.
That partly reflects a profit warning last summer that raised questions about how effective the company’s preparation for different sorts of weather is – I still see that as a risk.
But with a strong brand, ongoing growth opportunities and proven business model, I took advantage of a lower share price to add Greggs to my portfolio.
Myth 3: now’s the wrong time
Another myth is that it is the wrong time to invest – always!
It was easier in the old days… there are more opportunities after a crash… it makes sense to wait for an economic boom… on and on go reasons to procrastinate, according to some.
I do not think there is ever objectively a wrong time to invest – it depends what you invest in.
