If your goal is to grow near-term as well as long-term wealth, investing your money could be your ticket to it. If you’re new to investing, you may believe certain myths that could come back to bite you. Here are a handful you shouldn’t buy into.
1. Investing is only for the wealthy
While having more money to invest opens the door to more opportunities, you don’t need to be rich to open a brokerage account and start putting your money to work. In fact, many brokerages don’t impose account minimums, so you can invest as much or as little as you choose.
It used to be the case that if you didn’t have the money, certain stocks would be off-limits due to their high share prices. That’s no longer the case today. A growing number of brokerages are offering the option to purchase fractional shares. With fractional shares, you buy a piece of a share of stock, as opposed to a whole share. Say you only have $200 to invest and you’re interested in buying a stock that costs $1,000 per share. With fractional shares, you can still buy a piece of it.
2. Investing is risky
The stock market is notorious for crashing, but guess what — it’s also known for recovering from downturns. In fact, with the right approach and asset allocation, investing doesn’t have to be risky at all.
Generally speaking, you’re best off buying quality stocks and holding them for years rather than attempting to time the market by buying low and selling high. Also, if you diversify your holdings within your portfolio, you’ll reduce your risk while opening yourself up to added gains.
You do have to be careful about holding too much stock in a retirement plan, however. That’s a perfectly safe and smart thing to do when you’re younger, but if you’ve left the workforce and are taking regular withdrawals from that account, you’ll want to make sure a substantial portion of your portfolio sits in bonds. In fact, you should start shifting toward a more conservative asset mix a few years before retirement kicks off.
3. Investing requires a lot of effort
It does, in fact, take time and effort to research individual stocks before adding them to your portfolio. Buying index funds, however, takes a lot less work. If you’d rather simplify things, that could be a smart way to go.
Index funds aim to match the performance of the market indexes they’re tied to. You won’t beat the market with index funds, but you will get to capitalize on broad market gains. You’ll also get instant diversification in your portfolio, which will help limit your risk.
Get schooled on investing
Investing for the first time can be daunting — there’s no question about it. Don’t get scared off by the myths above. Instead, learn more about investing basics so you’re comfortable putting your money to work.
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