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Investment Myths

Discussion in 'Beginner's Lounge' started by SFA, Jan 19, 2017.

  1. SFA


    Likes Received:
    Nov 17, 2016


    Investment Myths

    There are a lot of myths and misconceptions floating around on the internet about investments. Advice such as diversify your investments, only invest in bluechips, buy cheap, etc. The biggest lies are “investment is too risky, so just leave it to the ‘professionals’ to do the job” or, “you need a lot of money to invest”. The fact is we should always educate ourselves in every circumstance, to ensure our money is in the right hands and invested in the right way. Furthermore,with the right tools and the right strategies we can start investing with less than $1000.

    Many “marketing experts” will take advantage of new market booms as a bait to attract people fall into the latest investments. Market traps cause new investors with little fundamental knowledge to invest into the wrong area. It is always important to make sure you are well informed and educated to avoid unnecessary loss! There are plenty of opportunities in the market, but only for those who are well prepared!

    A note from my personal experience.

    In 2011, all the news, analysis, brokers called for bullishness of gold and silver. My housemate advised me to invest into silver with him. At that time, one ounce of silver was traded at $40. Due to unfamiliarity of the commodity, I stayed away from it but started to pay attention and analyse commodities – silver and gold. It has dropped below $20 in 2015!
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    However, I believe the big bull of gold and silver is coming soon. One more final leg down then they will rise and shine. Those who have prepared and managed to catch the bull trend will be prospered!
    GoldHunt likes this.
  2. galumay

    galumay learner

    Likes Received:
    Sep 17, 2011
    Sounds like one of those investment myths to me.
  3. ROE


    Likes Received:
    Jan 5, 2007
    Buying and gold and silver are tilt more toward punting than investing, so it is a myth calling gold and silver investing :)

    You buying gold and silver hoping that someone will willing to pay more for that stuff in the future
    while holding it you received no dividend, there is no possibility of growing it to 2 silver or 3 silver
    so your only hope is someone willing to pay a higher price than what you paid for.
  4. OmegaTrader


    Likes Received:
    Jul 19, 2016
    My opinion only. Not advice

    1) most people don't have the time and or willingness to invest their money

    This is due to the opportunity cost of doing so and the learning curve caused by the complexity of the modern financial system and human nature in general.
    If I am earning $40ph or $75,000 a year, why would I spend time investing, better to work and either passively invest with a product, diversified passive portfolio or with a so called professional.
    At $1000, how much would I make $200??? for all my effort, not worth it unless I enjoy it.
    Also one has to beat not only opportunity cost of labour, but also opportunity cost of capital. So back to $1000, sure I make $200, but given the same risk perhaps I could have made 12% in the stock market anyway, so really I only made an extra $80. I haven't even mentioned, tax disadvantages or extra transactional costs. Add on the fact that opportunities are not always there. And finally the icing is the stress of losing money or that in fact your strategy could be wrong.

    2) Rule of thumb is useful to people but there are exceptions

    Imagine crossing the road without rule of thumb. Is the car going to stop? Am I going to get mugged. Is it going to rain? Pure calculation can lead to inaction as simple tasks become complicated to analyse. That is why as a species we have big picture style thinking. Th bad part of rule of thumb is the exceptions and false anchoring. People look at a limited example and then make a rule. That rule is then used without question, that is part of the reason why myths persist and cause so much trouble.

    3) Markets are uncertain.

    The other issue, is that it is hard to know what actually is myth and what actually is fact. In the past I can test what worked and what didn't work, but in the future their is no guarantee, that the same fact based rule will work. Eg stock and property assets always go up in the long term.
    Go and say that to someone in Japan or Greece and see the response that you get.

    I like the quote/verbatim I read somewhere, markets are more like economics and psychology, not physics.

    I agree that this mindset seems a bit myth like...
    It sounds like me when I am gambling :rolleyes:

    My two cents
    SFA likes this.

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