While rising interest rates make saving more attractive, it’s vital to remember that inflation is also rising. If you want to keep pace with inflation, let alone beat it, you almost certainly need to commit to investing rather than just saving. If you’ve been put off investing by believing some common investment myths, then think again. Here are 5 common investment myths debunked.
Myth 1: Investing is only for the wealthy
The wealthy certainly invest but they do it for the same reason as everybody else, i.e. to grow their money. There are plenty of routes to investment for people on average or even low incomes. The key point to understand is that the principle of compounding works for investing in the same way as it does for saving.
In other words, when you invest a small amount, that small amount will grow. You will therefore get the benefit of the growth as well as the initial investment. You’ll then get the benefit of the growth on the growth and so on.
Of course, it is fair to say that the more you can afford to invest, the more you will earn. It’s therefore definitely worth investing as much as you can for as long as you can. It is, however, certainly possible to get started in investing with only limited investment capital.
Myth 2: Investing is too much risk
Anyone who’s ever seen an advert for an investment product will probably remember the warning that the value of investment can go down as well as up. This is true but it’s taking it way too far to say that investment is just like casino gambling. In fact, if anything, not investing is probably far riskier than investing.
The reason for this goes back to the effect of inflation. Just putting your money away in savings accounts, even high-interest accounts, is unlikely to keep pace with inflation. It’s hugely unlikely that it will beat inflation. That means the money you save is actually devalued over time.
For clarity, there are many good reasons for having some level of cash savings. In general, however, you should see these as a cash cushion rather than a way to grow your money.
Myth 3: Investment is just about luck
Successful investors do not just randomly pick investments and hope to get lucky. They follow a defined strategy that has been created to meet their needs. There is plenty of guidance on how to develop such a strategy. Quite a lot is available for free.
Myth 4: You need high-level maths skills to invest
Having a solid grasp of maths can help with some parts of investing. The maths involved is, however, fairly basic. It’s mostly around ratios and percentages. These are commonly used in everyday life so most people are comfortable with them. If you want a refresher, there is plenty of help online.
Likewise, you don’t need to be fluent in investment terminology when you start. You’ll pick up what you need to know as you go along. If you’re ever in any doubt, there are investment glossaries you can check.
Myth 5: Investing takes up too much time
Professional traders may spend all day glued to computer screens but people investing just for themselves rarely do. Investment is not about timing the market or trying to make a quick profit. It’s a get-rich-slow-scheme.
Investors with small portfolios will probably be just fine managing their investments themselves, possibly with free help from online forums.
Investors with more significant portfolios will probably need to put in a lot more time if they want to manage their portfolios entirely themselves. At that point, however, it often makes sense to bring a professional on board to help ease the load.
For more information, please get in touch
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Approved by The Openwork Partnership on 3/8/23