4 Myths that keep you from investing

According to Gallup, roughly 62% of Americans have ownership in the stock market. This number is drastically lower in other parts of the world. While some people genuinely can't afford to invest, for others it’s a different story. With this post, you will know why these myths exist and are so common, how these myths hurt you by holding you back from accumulating wealth, and lastly, how to rebalance them with truths that make you money.

For myth number 1, people often say, “I don't know enough to invest”. Back in 2012, or 2013, the Observer, did a study to find out who is best at picking stocks. There were three contestants: 3 experienced managers, a group of high school kids, and thirdly, a cat called Orlando. Every contender was given an imaginary amount of $5,000 at the start of the year. By the end of the year, the professionals grew their dollar amount by $176, the students lost $160, and the cat accumulated $542. The cat chose their stocks by throwing a toy mouse on a grid of numbers, allocated to different companies. You don't need to be an expert to get started, you don't need to read the morning newspaper, or find the next NVIDIA. This is exactly what index funds are for. These are fantastic because they let you invest in hundreds, sometimes thousands of companies, all at once. Instead of guessing which ones do well, you're investing in all of them. It’s a really great way of reducing the risk, if a single company does badly one year, it significantly reduces the impact of your portfolio. Historically, the market always produces a return over time. The biggest risk isn't failing, it's never starting. No one is an expert when they start, and even the professionals don’t have it all figured out either.

The second myth is people saying, “I don’t have enough money to get started”. There is a misconception that someone needs tens of thousands of dollars to get started in investing. It is a fairly common misconception, and one that I believed as well for the longest time. When we think of someone as an investor, we think of someone with this 5 figure portfolio, insider knowledge, and complex spread sheets. Like it's a club that you can only join once you're already wealthy. That is definitely not true, not even today. In today’s time, you have a wealthy amount of apps, and information out there to get started. For as little as $1. With no minimum balance, no middleman, like in the past, and no gatekeeper, and you definitely don’t need to be rich. What matters is not how much you invest, but how early and consistent you are at investing. Compounding rewards time, not wealth. People wait until they feel ready to invest, but the truth is, you will never be ready for that perfect entry into the market. There is always going to be another bill, another goal, another excuse to delay your wealth. Here is a secret, the key is to start where you are. Even me, I had this exact mindset, and recently I started investing $20 every two weeks into VOO, Vanguard S&P 500 ETF, last month. Every investor started with something small. The only difference, they didn't wait until they could afford too, they started so they could.

For the third myth, people are told that investing is just gambling. I can see why so many feel this way, cause I too was there. However, unless your parents taught you about the stock market, (which mine haven’t taught me anything about finances), or you haven’t studied the stock market (something I am teaching myself, as well as finishing up my bachelors in finance), you probably know about the stock market through the news. When the stock market crashes, or crypto prices sky rocket, all over night, investing can seem like you’re gambling. You stake your money, and if you're lucky, you double it. If you are not lucky, you lose it. I can understand how this is not the best “first impression”. If any of this sounds familiar, keep this in mind:

Gambling

• Based on luck

• Odds are stacked against you

• Always has a negative expected return

• The house always wins by design

Investing

• You have ownership in businesses

• Something that generates profit over time

• Profits drive positive returns

• Investors earn through dividends & growth

Over the past century, stocks and bonds have positively produced returns, reliably. The longer you stay invested, the more likely you are to win. In the graph below, it shows how the stock market has beaten inflation, other than keeping your money in the bank. If you invest for just one month in the market, you are likely to lose 40% of the time due to inflation. However, if you invest for 12 months, you are likely to lose 30% of the time due to inflation, and if you invest for 20+ years, you are not going to lose to inflation.

We know that after sharp, daily drops, the market often rebounds quickly, with more than a quarter of recoveries within just a few days. The news loves to report market crashes, and not the recovery side of it. This makes investing look far more riskier, than it actually is. If you’re investing short term, then it is like gambling. You're chasing trends, trying to time the market, and eventually panic sell, instead of holding. It’s the same thrill of the chase, and the same urge to win back what you lost. A long term investor does the complete opposite. They diversify, stay invested, and focus on building wealth.

The last myth, people think it’s “too late to start”. We’ve all heard stories with people in their 20s, investing $500 a month until they’re in their 50s with over 6 figures in their portfolio. Well that is true, it's a very small number of people who have done that. Think about it, how many people can do this in their twenties? Especially when we are just finding our feet in the world. Most people in their twenties are still in college, starting an apprenticeship, interning, etc.. Your income is probably quite low. Yes, as the years pass by, your financial obligations do creep up. With only so many short term things to budget for, it's easy to say, “I’ll invest later when I have time”. By the time we’re in our 30s-40s, I understand how it feels too late. You start playing around with an investment calculator. I'm 35 currently, and I was there. However, I started looking forward instead of backwards. Start now with $200 a month if you can. If it's less, then it’s less. However, if you're in your 30s-40s, your income is probably higher than it was in your 20s, and you should be able to cut back and invest more into your future. Hopefully you're more financially stable, and you can afford to invest more each month. It makes a much bigger difference than you might think. You haven't missed out, even if you started later. The time will pass anyways, so you might as well invest now with what you can and try and increase the number over the years.

A quick recap, you can start with any amount, you’ll learn as you go, you don't need to know everything at the start, investing isn’t gambling, and it’s never too late to start investing. If you haven't started investing yet, these myths are surprisingly comforting, but the truth is, waiting is the most expensive thing that is going to cost you in the future. No matter how much you're starting with, just start. Time is going to pass anyway, so put your money to work today.

Thank you for taking the time to read my blog. If you know anyone who uses these myths, please share this article with them, or if you use one or all of these myths, hopefully you learned something from it.