The Five Biggest Stock Market Myths

It is no secret that well-planned investments in the stock market can greatly contribute to your efforts in wealth creation. However, traditionally, India has been a country in which people have approached the share market with caution and much hesitation. A major reason for this is that there are various myths and misconceptions about the share market that have made their way into the public consciousness. These myths tend to keep potential investors away from the market, thereby losing out on a great opportunity for their finances.

This trend seems to be changing in recent times. The National Stock Exchange, for instance, has recorded a growth in individual investors from 17 lakh new investors in FY09 to 28 lakh new investors in FY19 [1]. At present, about 2.78 crore investors are registered with the Exchanges and the number only seems to be climbing every year[1].

If you too are considering investing in the stock market but are held back by one of the many myths about the market, here is a look at how these myths are actually false:

1. Stock Market Investing is Essentially Much Like Gambling:

This myth about the stock market is often spread in the form of well-intentioned but misguided advice. Concerned by a few stories of loss, people might consider it best to advise you against the odds of the stock market. However, the comparison of the stock market to gambling could not be further from the truth.

While gambling concerns itself with winning or losing by chance, stock market investment is driven by a number of factors. These include the history of the market, the present economic conditions and information about the company you want to invest in. Unlike gambling, these factors are not random and with adequate research, can be studied and predicted to make profitable investments.

2. The Stock Market is Exclusively for Experts

Another myth that concerns several potential investors is that investing in the share market is a closed game and is reserved exclusively for a select group of people. However, this is a complete misconception as anyone can participate in the stock market and make the most of its benefits for wealth creation.

Investing in the share market certainly requires developing a certain know-how of the market and identifying the right shares for your risk appetite. But this process of learning is continuous and develops over time. The share market favours preparation and is, therefore, open to anyone with a keen interest in the market. Simply open a trading account with a reliable broker and start investing.

3. You Can Only Make Money By Investing A Lot of Money

A myth that discourages new investors in the share market is that it is only an ideal investment for the wealthy. This myth stems from the belief that to make profit, one must have a lot of financing to survive the various losses along the way. However, this is entirely misguided.

Like all investment options, the share market offers opportunities for traders with a variety of risk appetites and capital. After opening a trading account, you can even invest in shares for as low as 10-50 rupees. The key is to recognise the right companies and shares to invest in, and to develop a strategy to minimise your losses from the very beginning.

4. High Risk Means High Returns in the Stock Market

It is true that certain high-risk investments in the stock market prove favourable to certain traders. However, not all high-risk investments equal high returns all of the time. If this cause and effect relationship were true, investors would only be trading in high-risk investments.

In truth, high-risk investments carry just as much chance of losing big as they do of winning big. It requires caution, patience and research to find a high-risk investment that you can place your faith and finances in. Keep in mind that some of the biggest names in the industry built their wealth by investing in various small, low-risk investments that paid off in the long run.

5. I Should Just Try My Hand at Stock Market Investment

The first myth about stock markets deals with excessive caution by comparing it with gambling. On the other end of the spectrum, however, is the myth that the stock market is a playing field where you can dabble without much consequence. As a result, people might feel inclined to invest in the share market based only on the few suggestions and recommendations they might receive from friends and family.

However, in order to truly profit from the stock market, an investor should spend some time doing a fair bit of research. From understanding the market, to gauging the current economic trends, to formulating strategies, it is important to have at least a basic plan in place. In the age of the internet, there is a wide variety of research, market reports and helpful advice that can guide you in the right direction.

Conclusion

Like all investment instruments, stock market investments require their own share of homework and preparation. Once an investor can overcome these and various other myths about the share market, they too can utilise the wealth creation potential of the market. All it takes is to get started on some research, develop some simple strategies and open an online trading account and demat account to start investing. With the help of an online trading account and demat account, you can take advantage of the ease, flexibility, and speed of trading with the click of a button!