Busting Myths around Stock Market Investing3 min read
As we enter the new financial year, it is time to sort your finances. People are hustling to manage and secure their wealth. Although stock investing doesn’t call for any specific time of the year, this can mark the beginning for some.
It is known that the art of investing isn’t mythical. Yet we come across many myths floating around this concept. Be it an amateur investor or a pro-trader, everyone has a few stereotypical notions and biases developed over years.
But busting those myths is the need of the hour. Before you venture into the world of stocks, ETFs, bonds, it’s imperative to steer clear of some rumors or myths to avoid making investing a daunting task.
To help you distinguish between a myth and a fact, we have curated some popular ones:
1. Investing is complex and only those with a huge sum of money can afford it: This is the most powerful and common myth. It can be simple like starting a SIP or complex like technical analysis. Also, you can put as minimum as Rs 100 as your first investment.
2. It’s risky and much like gambling: Society often labels stock investing as gambling where you put your money but can’t be assured of positive returns, making it a risky game. Market bumps cannot be considered as risk, since there won’t be the chance of losing capital permanently. Take informed decisions and avoid overtrading. History shows that markets have always moved up even after corrections.
3. Go for ‘winning’ or strong stocks: Bias towards stocks which generate returns and have impressive portfolio performance i.e. winning stocks may not be a viable investment always. Often underdogs like midcaps and small caps can also clock in profits. For example, Nifty Smallcap index was at 2867 points during March 2020. Two years down the line, it is at 9441 points.
4. Time the market: Timing the market is of prime importance. When the Covid-19 pandemic struck, many investors pulled their money out of the market in fear of a downturn. However, if you try to trade in and out of the market consistently, you will soon realize that the risk you are taking is significantly higher for the return you may earn. Go for SIPs and asset allocation strategies. And don’t get overwhelmed by the news around you.
Other myths like the need to explore beyond the desi stock market i.e. international investing, and that savings will suffice for the future doesn’t hold strong ground.
Standard misconceptions stem from the fact that insurance is also a form of investment. But both are completely different methods of managing finances. Insurance is protection against financial loss, while investing is a form of wealth creation. Insurance alone shouldn’t satiate your financial cravings.
But why do these myths circulate in the market? Is it because of encounters with price slumps or simply the word of mouth? Well, the lack of financial literacy is also a potent factor contributing to investors succumbing to these myths.
To fill this void, Paytm had forayed into investor education with Paytm Wealth Academy. From courses to webinars in an interactive format on beginner topics like the basics of stock investing to advanced concepts like technical trading, this platform will up your ‘financial’ acumen and make you invest ready.
