Don’t Let These Misconceptions Misguide You
Finance Tips Investing can get complicated, so don’t let these misconceptions fool you!
Don’t believe everything you read or hear! There are a number of myths when it comes to investing — here are a few of my favourite myth-busters:
Investing is just for the wealthy.
Investing can make you wealthy almost regardless of where you are starting from. While more income and more savings directed for investing purposes certainly help, in many cases you can get started with investing with just $50. Of course, you always have to question whether investing is the right decision for you in the first place. For example, if you have major debts such as personal loans, credit card debt or a big mortgage, you might be better off clearing those debts before investing.
Past investing performance is a predictor of future results.
Although many people pretend they can see the financial future, nobody can with any accuracy. While stocks tend to earn more than bonds and bonds to tend earn more than idle cash, over long periods of investing, nothing is certain. This is why investing in different asset classes (stocks, bonds, real estate, and commodities) can be very important for investing success.
Active investing always beats passive investing (and vice-versa).
Actively managed money typically relates to a portfolio run by a professional fund manager or a do-it-yourself investor, who decides on and rebalances their own investments, such as stocks, bonds, or funds. Passively managed money typically relates to index-tracking products like exchange-traded funds (ETFs) — funds that mirror the performance of the index they track and therefore have little active management. The debate over which strategy is better has gone on for years and will continue to do so. However, all things being equal, passive investing, because of its low-cost structure, may outperform active money management over time.