Refuting the 7 Myths of Self-Directed Investing - The First Amateur Mistakes
Investing on your own takes too much time.
True, but that was back in 30 years ago. Today we live in a world that allows accessibility to many different markets all over the world. On top of this, the exchange of information is much faster then it use to be. If you have as little as 10 minutes per day, you can get all the information you need to be a successful investor.
Investing in the stock market is like gambling.
Successful investors know when the odds are in their favor and when they are gambling. I agree that like gambling, there is risk involved with investing. However, unlike gambling, which is designed not to offer growth opportunities (but rather short term fluctuations in your money), investing provides both you and the business your investing in the opportunity for growth.
Paying a professional is better than trying to make your own investment decisions.
Statistics show that only one out of every five mutual fund managers will actually best the S&P 500, not to mention the huge commissions they charge. With that said, if you do not have sufficient training to evaluate a stock’s performance, how will you be able to know if you have found a skilled money manager?
Investing on your own increases your risk.
This statement would be true if it stated “Investing on your, without the right education, increases your risk”. I would agree with that, yes. With the proper education however, I am a firm believer that no one cares more about your money then you.
Investing is as simple as knowing which stock to buy.
50% of an investment is knowing when to buy the stock. Care to take a guess what the other 50% is? Very good – when to sell the stock of course! Many investing experts would agree that an exit strategies have a bigger impact on your investment performance than your buying strategies.
You have to be intellectually gifted to do your own investing.
Not exactly. Many research projects have consistently shown that there is no significant correlation between a high IQ and investment performance. What is true is that education and experience in the market can go along way to improving your chances.
Individual investors can only make money when the market is going up.
The truth is that the market is always going up somewhere. Even when the market is in a downward trend, this could simply mean that money is shifting from sector into new sectors. If you can spot this shift, then of course you could make money no matter what way the general market is trending. Nobody is forcing you to keep your money in a losing investment, so move it when the shift is on. You have an advantage over mutual fund managers in that they cannot be as quick to move money around as you can. You are not limited to buying and holding like some of them are.