Getting Started With Investing: 5 Myths Debunked
When you’re young, investing seems like what will happen when you stop having sex and start having “casserole night” every Thursday. Then you get a bit older and realise that spending half a week’s wages in Agent Provocateur and having a magic moment with your Le Creuset are not mutually exclusive. And in fact, if you’re going to keep buying amazing underwear and good quality cast iron pots in a range of rainbow colours to match your every mood, planning your finances properly is essential. And can even be fun!
Even putting £100 a month into a 5 year plan is well worth it.
But there are so many scare-stories out there that can put you off getting started. To ease your mind – and hopefully your path to riches! - we've collected together and de-bunked five major money myths
- You need a lot of money / have to be rich to invest
Think of it this way: if you keep money in the bank, you can keep it in a portfolio. Even if after paying off your credit cards and other debts you only leave a tiny amount untouched each month, set up an automatic transfer with one of the handy apps now on the market and squirrel away those little acorns in a place where, unlike a current account, they will eventually grow in to a great big mythical golden oak tree that rains money down on your future self.
- Always look at past performance of a stock
Ever seen a bubble burst? A company that has shown astronomical growth over the past few years may well be about to crash. Even sparkly new IPO’s often have their best investment days behind them.
- Investing is like gambling
Well… there’s some truth in the fact that unless you own the casino or manage the fund yourself, you can’t guarantee a tasty profit. But the blackjack table or that horse in the grand national with the cute colours are never going to offer you good odds. Whereas the chances that global businesses run by well-regulated but ambitious professionals who all want to make money, will make money, are way better. It’s that simple.
- Bonds are risk-free
OK you know what we just said about the general health of global industry? Well the path of general upward mobility never proceeds in a straight line. Companies fail. Governments mess up. Nothing is risk-free and you know it.
- Active investing always beat passive investing
When Warren Buffet bet his pocket money that a fancy hedge fund would do no better than a boring old index-linked package that follows the market, he wasn’t kidding. Because over time, that fund manager who “actively” tracks every bubble, wobble and weird echo in the market on your behalf, will take a hefty fee and a nice percentage of your profit. Active investing may be exciting and glamorous, but it’s a bit like flying first class to Paris instead of taking the Eurostar. You end up a bit further away from your destination, having spent a whole lot more money, and you risk looking a little... extra.
So, armed with our mythbusting mythbustery, go forth and multiply your cash! Just don’t forget to spend your profit on equal parts tiny knickers and big saucepans. Because you are a well-balanced, rational being. Aren't you?
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