The first time I spoke to my friends about investing, I received a very blunt and defensive response.
“It’s very risky,” said one of my friend’s sisters who was also at the birthday dinner.
I explained that I knew what I was doing, so it wasn’t that risky, but she wasn’t listening at all.
She interrupted me.
“You can lose all your money,” she said.
I couldn’t change her mind about investing being risky, and maybe I wasn’t meant to either.
She needed to justify why she wasn’t investing. She needed to look right in the eyes of her sister.
Her statements were about her and how she wanted to be perceived – not about investing at all.
No one around the table was interested in hearing anything about the stock market, because they had each their peg to hang their decision not to invest on.
We can use myths as an excuse not to take action and invest. That’s why it’s so important to be aware of them and challenge them.
Here are the five most common myths:
Myth 1: You Need a Lot of Money
Some people think you need to be a millionaire to invest, but most millionaires became rich exactly because they invested in shares, property, their own firm, or something else.
You can easily buy shares for less than 100 USD (obviously it depends on the price of the stock, but there are stocks trading for less than 100 dollars per share).
Some will argue that the fees will swallow up too much if you invest only 100 USD, but you must remember that investing experience accumulates like money.
That’s why it’s important to get into the stock market even if you only start with a little.
Myth 2: It’s Too Hard
It doesn’t have to be complicated. There are easy ways to invest.
You can choose an index fund (like an ETF), and you can set up the investing platform so it automatically buys shares in the fund for the same amount each month.
There are several advantages to this:
1. You only have to set it up once, and it’ll take you around half an hour. You can go on and live your life, because your investing will be automated and take care of itself.
2. There’s a built-in diversification, meaning that you’ll invest in many companies with just one click. That’s a safe strategy. All the companies in an index won’t go bankrupt at the same time, so there’s no way you’ll lose all the money.
3. When you buy for the same amount every month, you get an average price for the stock, and this means you’ll avoid investing all your money at the top. This is called dollar cost averaging.
Myth 3: It Takes Too Much Time
It’ll take as much or as little time as you want it to take.
If you choose the road of passive index funds, it’ll take you half an hour to set it up and the rest will take care of itself.
Some of us love investing in individual companies that we choose ourselves.
That’s called stock picking, and of course that takes more time. It’s more exciting for two reasons.
1. If you get good at it, you’ll see a higher return.
2. Understanding companies and following them turns into a hobby.
Myth 4: It’s Too Risky
It’s only risky crossing the street if you don’t know the rules of traffic.
If you don’t know the basic rules, trying to go anywhere will be pretty complicated and dangerous.
It’s a really good investment to do some research, take a course, or read a book. You can download my book about investing right here.
We don’t send our kids into traffic without teaching them about the traffic rules. We don’t send them swimming without swimming lessons first.
It’s a great idea to gain some knowledge, but that’s not the same as saying that it’s too complicated.
Crossing the street is pretty easy, but not if you don’t know what the red light means.
Myth 5: It’s Boring
You have no idea.
It’s anything but boring. It’s exciting. It’s addictive. It’s all-encompassing.
As a student once told me:
“I just bought my first stock, and I’ve spent 15 minutes watching it go up and down. It’s fun.”
Your Best Defense Against the Myths
If you constantly encounter the myths in your circle of friends, there is only one thing to do: ignore them and change the subject.
Don’t try to change anyone’s mind.
It can be quite tiring trying to convince others that you aren’t wasting your savings, and that you’re not addicted to gambling because stock investing isn’t gambling.
There’s no point in arguing, because sometimes people have made up their minds that investing isn’t for them, and they’ll defend it till the day they die.
The best thing you can do for yourself is to find someone at your level to talk to about shares and stocks with.
You’re welcome to join my Facebook group “Managing Money Freedom” right here.