The stock market is a topic that comes up often, even if you don’t work in the finance space. There are a lot of myths and rumours that get spread about the stock market and how it works, so join us today as we dive into the top 5 stock market myths:

Investing is Like Gambling

Many people, particularly those that have been stung by the market, will tell you that putting your money into the stock market is no different to gambling. If you treat it like gambling, it can become something similar, but Host Andrew Baxter explains that working to find small edges in the market can turn it into something where you have an advantage over time. Usually, if you’re playing a losing game you will eventually give up as the results tend to reflect the odds over time. The only way to improve your odds is to upskill and work hard at honing your skills in the stock market. 

Risk Management

A common mistake amongst beginners is treating both losses and wins in the same fashion. Host Andrew Baxter explains that gains and losses are not the same thing and most certainly should not be treated the same way either. If you were to lose 20% on an investment, you then have to make 25% on it in order to get back to where you started because the price is now lower and you need a larger percentage increase. Before getting started in the stock market, make sure you have a plan in place for how you manage your risk, otherwise you could find yourself in a world of pain when it comes to your account balance. Your ultimate return will also come down to a lot more than simply winning trades as big losing positions can easily wipe out any gains you have made in other positions. Keep in mind success over the long term in the stock market is not purely about what you make, but what you get to keep.

The Stock Market is Only for the Rich

There was a time when getting involved in the stock market was very expensive and as such was not accessible to many. Host Andrew Baxter however, explains that times have changed and with the modernising of technology and how the stock market operates, it is now cheaper for every day people to buy shares. The changes have allowed for some levelling of the playing field as everybody can now access the market very easily and get started in the investing space. If you’re currently in a position where you don’t have a load of money and you don’t think you can get involved in the stock market, think again because you can gain access to investment opportunities just like everyone else.

Stocks Always Recover

Sometimes when a stock price moves down, holders of that stock can often hang on under the notion that eventually all stocks recover. Host Andrew Baxter notes that although sometimes stocks do recover, there is no compelling truth to the idea that every stock recovers after a move to the downside. Sometimes you will be better off hanging on for a long time to try to see a recovery but other times hanging on could work out to be a major disaster. So before opting to hang onto your shares that are worth far less than where you bought them, think about how confident you are of the share price recovering and if the money tied up in this shares can be better used elsewhere.

Not Evolving your Strategy

The stock market presents a different picture every day but some people still find themselves devout to a single strategy for years and years. Host Andrew Baxter explains that it is critical to be able to adjust your strategy so it is suitable to the market you have in front of you. Instead of completely overhauling your strategy regularly, you only need to make minor adjustments to how to execute your strategy to make it fit into the jigsaw that is in front of you.