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.
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.
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!
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!
I agree that this mindset seems a bit myth like...
It sounds like me when I am gambling
My two cents