Myths about Investments: True vs False

For many people, the investment field seems to be yet a mysterious world, covered with a veil of secrecy and doubts. Perhaps, it is partly for this reason that the share of private investors is not so large in many UE countries. How justified are these doubts? Or maybe some of them are just myths that should be debunked?

Myth #1 – investing is difficult, it takes a lot of time, I cannot manage it by myself.

– False. If you are going to open an investment account and independently choose stocks, bonds and other investment securities, actively trade throughout the working day, then, of course, you will need a lot of time. If you invest through investment funds, trust management, structural products, that is ready financial decisions that do not require your involvement in management, then it will take you only about 1 hour per quarter to track the situation on your savings.

Myth #2 – in order to profitably invest your money and make profit, you need a special education.

Partially true. If you have no idea what the stock and bond are, then it is better not to use any tools other than bank deposits, since you will not represent the risks associated with investing in certain financial instruments, you will not understand the relationship between the current events in the world and the results of your investments. You also will not be able to correctly select the tools suitable for you by the level of risk: for example, you can choose for 3 months mutual funds of shares that are more risky than mutual funds of bonds. So basic financial education is vital for a successful investment.

Myth #3 – to start investing, you need a plenty of money.

False. If we talk about individual investment instruments, for example, trust management, they are usually available for large amounts of several million of USD. But there are also those products that are also available for amounts of 50 thousand USD and below: mutual funds, a number of foreign funds (ETF), opening a brokerage account for independent investments.

Myth #4 – it is better to invest in less risky types of investment, for example, in deposits.

Partially true. The right investment tools depend on the period for which you are going to invest money. But also they depend of the risk, which is ready to go for the sake of potential income. And if you categorically do not take risk and invest for a short time (up to 1 year), then deposits will be quite suitable for you, since inflation for the year will either be fully or partially covered by the yield on the deposit.

But if you invest for a longer period, inflation may already pose a real threat to your savings, and it cannot be covered by deposits alone. And in this sense, in addition to contributions, it is better to include in the portfolio instruments that can withstand inflation: stocks, precious metals and other commodities.

Myth #5 – there is no investment that would guarantee a hundred percent saving and augmentation of funds.

True. Bank deposits do not guarantee 100% of capital preservation from inflation and do not guarantee that the interest rate set for deposits now will remain unchanged even one year after the expiration of the deposit term. Also, bank deposits do not protect against depreciation of the currency in which they are open.

Investments in the stock market also involve risks associated with market fluctuations. But they can show a profitability that interrupts inflation, especially when it comes to long-term investments.

Investments in real estate also do not give guarantees that the prices for it will grow forever. The same fact is true for investments in gold.

So, in order to protect against inflation risks, market and currency fluctuations, you need to invest not in one instrument, but in several different ones. This is one of the principles of successful investment.

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