Myths about investment

Correlation coefficient, standard deviation¨ What's it? It's too complicated.

Yes, it's complicated indeed. But let's debunk this myth right away: a specialist who wants to explain something to a beginner is determined to be understood and will not use terms unfamiliar to the interlocutor. An expert is not someone who uses specialized terms, but someone who makes the difficult easy to understand.

There's a lot of information online about investing, and it's easy to get confused. This is the premise behind the view that investment proposals are an attempt to deceive. People often have negative experiences. These are the reasons that make you believe the myths about investing.

1. It is difficult. Therefore, it is better to take the money to the bank or buy a car/real estate. Buying a car or real estate is really great. But this is the goal, and investment is a tool to achieve the goal. A car and real estate are not a direct means of earning money, you will have to pay for their maintenance and taxes. They can bring income, but this income does not always cover maintenance costs. Taking money to the bank is also not always a better idea. Banks do not believe in myths about investment, besides, altruists do not work there. No one will assign an interest rate higher than the inflation rate; the bank has no goal of making gifts to people. Nevertheless, bank deposits and real estate are options for making money. However, investments are no more complicated than either of these, and besides, are often much cheaper.
2. It's for the rich. People invest not because they have a lot of money. They do it in order to have a lot of money. Let's look at the numbers. The Russian market shares can be bought by spending less than 10 thousand rubles, the American - from 10 thousand rubles. And there are partner programs offered by companies that ensure compensating these costs by referral rewards.
3. It's a lottery. In lotteries and gambling, the benefits and losses are distributed randomly. There is a business, a company or a project behind the shares – nothing accidental can happen to them, their development is predictable. With long-term investment, the risks are close to zero.
4. It takes a lot of time. An investor, unlike a trader (trading is buying and selling on the currency or stock exchange; a trader is a person who has a license to engage in this activity), does not perform actions with his or her assets, they receive passive income. The actions an investor can perform: checking, withdrawing/depositing funds, investing dividends somewhere else. For example, he or she does it twice a month. Or when they want to.
5. Economic education is mandatory. Not every economics professor achieves high results in investing. Profound economic knowledge will help in studying history, but it will not help in predicting the market. Individuals learn this independently and by experience. People of different professions - including those that do not require education at all - invest and achieve high incomes. Besides, a professor may well believe in the same myths about investment.
6. The risk is too high. Therefore, it is better to just get paid for your work. Getting paid for work is absolutely right. But it does not guarantee financial well-being in the future. If work doesn't give you everything you want right now, are you sure it will someday? The risk of investing is approximately 80:20 (and if you make several investments instead of one, then it's 90:10). The risk of losing a job is about the same or higher.

In addition to the common myths that prevent people from starting to invest, there are myths that put people at risk of falling into a fraudulent scheme. Here are these myths:

1. You can earn money quickly. You can earn a lot on shares, but not quickly. Shares will bring much higher income than bank deposits, but shares do not grow in price daily. This is a long-term investment, you need to be ready to wait for several months or years. Buying a property in 5 years is a realistic goal. However, buying a hotel in 2 weeks is unlikely. As a rule, the timing can be calculated. But if you are promised a very high income within a few days - it's probably scammers.
2. This is a guaranteed income. Such a phrase is most often avoided by specialists. Even if the risks are close to zero, there are still some left. There is always a risk of loss, no matter what you do, whether you are employed or rent out real estate, the risks exist too. When the offer is honest, you will be definitely warned about the risk. The risk may be equal to one percent, but saying that there is no risk is incorrect.

Improving your financial literacy is the best investment in the future!