Investing myths that couldn’t be further from the truth
Does the thought of investing make your palms sweat? You’re not alone. Many potential investors stay on the sidelines and don’t invest because of the myths that surround it. The fact is, everyone should be investing to build wealth for the future. The stock market is a money-making vehicle that has historically offered an average annual return of ~7% for investors. That’s a higher return than any checking or savings account can offer you. Investing pays off, quite literally, and that’s why we’re busting through 4 common investing myths below.
4 Investing Myths Put to Rest
It’s time to wipe off the palm sweat and put these investing myths to rest.
Myth: You need a lot of money
The cost of living is outrageous these days. Not to mention the student loan debt young professionals often leave school with. This financial strain has generations feeling like they don’t have the money to invest.
The truth is, you don’t need lots of money to start investing. New players have entered the financial space and lowered the minimums required for investing. Now you can start investing with as little as $1.
With Finch, accessibility is a driving force behind the product. This is why you can invest the money sitting in your checking account and still have instant access. No need for the ‘save to invest’ strategy.
Myth: Investing is too risky
Investing carries risk, and no one wants to lose money. But keeping a wad of cash in your checking account isn’t the solution if you want your money to work and grow for you.
The good news is you get to choose the level of risk you’re comfortable with when you invest. You can select from lower-risk investments like government treasures, medium-risk investments like corporate bonds and index funds, or higher-risk investments like single stocks.
Generally, you will diversify your investments to optimize the risk level appropriate for you. This means you don’t put all your money into one investment. Finch allows you to invest in a diversified set of Exchange Traded funds (ETFs).
Myth: You can time the market
You can’t time the market. Let’s say it again for the people in the back. There is no such thing as ‘timing the market’.
It’s true the stock market can be a volatile beast. It will move up and down on a regular basis. What’s important is that historically, the stock market has proved to be resilient and trends up over time. This means that time in the market is more important than timing the market.
To neutralize the short term volatility in the market, investors use a strategy called dollar-cost averaging. Dollar-cost averaging is simple: invest the same amount of money in a set portfolio at regular intervals. When done properly, this strategy can have significant benefits for your portfolio. This is because dollar-cost averaging “smooths” your purchase price over time and helps ensure that you’re not dumping all your money in when prices are high.
If you have access to a 401k account, you’re already using this strategy. You put a little bit of your paycheck into an account each month and over time it will provide returns. Finch provides an opportunity to invest regularly by using the balance in your checking account. It’s done for you, so you don’t even need to think about it.
The key to building wealth is to invest consistently and stick it out for the long haul. No need to time the market, because even the experts admit you can’t.
Myth: It’s complicated to start
Investing only sounds daunting. It’s actually easier than ever to start investing. Financial institutions have long-established investing options. Brokerages abound with easy-to-use apps. Fintech companies like Finch are offering accounts that remove barriers and make investing effortless. Your options are more varied today than they ever have been in the past.
Don’t let investing myths stop you. Start today.
Taking the first step is the hardest part of investing. Hopefully, with these investing myths dispelled, you feel more confident about building wealth for the future.