There are plenty of opinions floating around about investing, and plenty of myths circulate that just aren’t true. Find out what’s true and what isn’t and make sure you aren’t making any major investment mistakes.
Myth 1: You need lots of money
People assume you need lots of money to start investing. But this just isn’t true. While you need money to invest, you don’t need a lot of it. There are options available to people who want to invest, but don’t have the capital to spend. For example, mutual funds are a safe option, and there are many out there that require as little as $50 to invest.
Myth 2: It’s risky business
Everything carries a risk. But if you invest smartly, you can mitigate these. Investing in a single asset carries more risk than diversifying your portfolio. And of course, some investments are riskier than others. Yes, the market could fall and you may lose money, but as long as you stick with it for the long-term, history shows your investments will bounce back if you do it properly. Remember, the market works cycles, so you need to be prepared to wait out the troughs.
Also, you are in control of how much risk you want to take on. There are plenty of opportunities where you can make money with very little risk, for example bonds.
Myth 3: I’m already an investor, I own my home
Yes, property is a good investment, but it’s not always a perfect one. While generally speaking you will make money off your home when you resell it, property is not always an appreciating asset, especially if you’re forced to sell during a downturn.
Myth 4: Property is a safe investment
Bricks and mortar are not always the safest option, especially if that’s all you’re putting your money towards. Don’t underestimate the costs of owning a property, because these will eat into your returns. For example, the biggest upfront cost is stamp duty. You’ve then also got legal fees, agent fees, and ongoing rates and insurance you’ll need to pay.
It’s also risky business because you’re not always guaranteed a good tenant who pays on time, looks after your property, and is happy despite rent increases. In addition, if all your money is tied up in property, you’re very vulnerable to market changes and cycles.
Myth 5: I’m too young
First and foremost, you’re never too young to start investing in your future. And this means putting money aside, in various markets, no matter what your age. In fact, the younger you start, the better of you’ll be in the long run.
When you’re younger you’ll be looking at different investment methods, for example, high interest savings accounts. But these savings accounts can lead to bigger things as you get older, as long as you stick to it and commit to depositing money at regular intervals. Alternatively, you can stick with that method as an investment opportunity, and by the time you’re ready to retire you could potentially have hundreds of thousands, if not millions, of dollars to your name.
Many young people also assume it’s too hard to get a foot in the door. But the reality is there is so much information out there nowadays, it’s never been easier. It’s also exceptionally easy to get on the phone to a financial adviser and get some help.
Myth 6: I can put money into my superannuation and then forget about it
While it’s tempting to only consider your current situation, it’s just as important, if not more, to plan for your future. While you can’t touch your superannuation right now, you still need to invest in it so you can live off it when you retire. Your superannuation is one of the most important investment decisions you will make, and it’s imperative you give it the attention it deserves.
Consolidate all your accounts, understand the fees and which account works best for you, and choose the best investment for your future.
Myth 7: Men are better investors than women
On the contrary, women are as good, perhaps even better, investors than men. Women are more risk aware, tend to have a more long-term orientation, and trade less than men do. Additionally, women tend to value financial safety above investments going up, so they tend to make less irrational mistakes, such as chasing the hot markets and commodities, or investing too much in a single area.
Myth 8: A financial adviser is just in it for the money
Many people resent the fees and commissions they need to pay a financial adviser. But the reality is, a good financial adviser can save you money in the long-term by guiding you to the appropriate investments. They will also help to put a plan in place so you can reach your financial goals quicker, and are on hand to answer any questions you may have. While there is so much information out there on the internet, nothing beats a personalised answer.
