Common Investing Myths Debunked

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There are many unfounded myths surrounding the investment sector that experts might find amusing. Unlike financial specialists, those who are new to investing don’t always know how to distinguish the facts from the fiction, and this confusion is often what leads people down the wrong path.

Believing a false myth to be true can lead to making the wrong choices or acting inappropriately, perhaps impulsively, or to not acting at all. Similarly, it could also make people think that learning about finance or seeking help from an expert advisor is a waste of time. To protect your money and make sure you don't miss out on valuable opportunities, it's essential to debunk these persistent myths.

Once this has been done, you can start looking around for investment opportunities that are more in line with your risk profile, time horizon and available capital, opting, depending on the case, for a Moneyfarm stock and shares ISA, ETFs, cryptocurrencies, fund units, real estate or more.

The 5 most common myths about investing

1. Only rich people can invest

This may have been true once upon a time, but it certainly isn't anymore. The advent of the internet has democratised the investment sector, making it increasingly accessible, thanks to easy-to-use digital platforms, and above all, affordable. From ETFs and shares in mutual funds to government bonds, there are many ways for people to get started with amounts they are comfortable with, even if their starting capital is quite small.

2. Investing is like gambling

This is a completely false idea, but one that is a very common belief among non-experts who haven’t explored how investing actually works. Investing has nothing to do with the luck-based "guessing game" of a gambler. Informed investors base their choices on methodical technical and fundamental analysis: they apply deliberate, tested strategies rather than just taking a punt.

3. Investing is a great way to make easy money

This is another widespread misconception, and it's a very dangerous one. Anyone who dives into investing believing it's a fast and easy route to wealth is setting themselves up for failure. Every investor must always be aware of the risks they are taking, accept the fact that profits are not guaranteed, and appreciate the need to learn about the market or talk to industry experts. This is the only way to increase the chances of achieving their financial goals.

4. Once you have invested, you don't have to do anything else.

Here is the fourth big misunderstanding. Investing isn’t a one-time event, but it requires a bit of ongoing attention. Investors must periodically check their portfolios to monitor the performance of their holdings. This check-up allows you to make necessary adjustments, like buying or selling, to keep things balanced. This is the only way to ensure that everything is working correctly and that the investments still align with your risk profile and time horizon.

5. It’s better to keep your money in a bank account than to invest it.

This belief seems logical at first. It’s true that investing exposes to risk and if things go wrong, losing some money is inevitable. Nevertheless, keeping it in a current account is not necessarily more beneficial, as it would suffer the devaluation linked to inflation and would be slowly eroded by the costs associated with managing and maintaining the account itself.