Could these investing myths be holding you back? In this blog we will debunk some of the commonly held beliefs.

1. The Stock Market is a Casino
When done correctly, investing and gambling have nothing in common.

In a casino, the longer you play, the more likely you are to lose money since the house has an advantage.

This is not the case with the stock market. The longer you invest, the higher the chance you will experience positive returns on your investments.

odds the stock market is positive

2. Stock Market Returns Are Consistent
The average annual return for U.S. stocks is around 10% per year. The stock market would be much easier to navigate if you could simply bank a consistent return every year. However, stock market returns are anything but average:

us stocks annual returns: 1926-2022

Annual returns are all over the map. Predicting next year’s return is almost impossible. The only way to smooth out this randomness is to have a long time horizon.

3. You Should Wait Until Dust Settles to Buy
The last few years have been great examples of why waiting could be detrimental. In 2020, when the world faced a pandemic and the economy went into a recession, stocks soared to new highs. In 2022, when the economy recovered, stocks plunged to lower levels.

Remember the stock market is not the economy. The stock market is forward looking and will price in future expectations. Oftentimes investing when things look bleak are the best times to buy.

4. Cash is Safer Than Investing
If you keep cash in a low interest savings account, you will slowly lose money because inflation will eat away at the “real” value of your money.

Over the long term, there are better uses for your money that have the potential to outpace inflation. Here’s a look at how “cash” has performed vs other investments throughout history:

growth of $100

5. You Need A Lot of Money to Start Investing
This couldn’t be further from the truth. Many people delay investing because they believe they need a significant amount. You can get started with as little as $50. The key is to start early and invest consistently. The easiest way to do this is by setting up automatic contribution and gradually increasing the amount as you earn more.

Bottom Line
Investing your hard earned money can be intimidating for many people, especially those who are new to investing. There are many myths and misconceptions that can prevent you from achieving your financial goals. Hopefully by debunking some of these myths, I have given you more confidence in investing.

George Maroudas, CFP®

George Maroudas, CFP®

847-550-6100
george@pmgwealth.com
Twitter @ChicagoAdvisor

Odds the Stock Market is Positive from George Maroudas. Data from Bloomberg

US Stocks Annual Returns from George Maroudas. Data from NYU.edu

Growth of $100 from George Maroudas. Data from NYU.edu

Stock investing includes risks, including fluctuating prices and loss or principal. This information is not intended to provide specific advice or recommendations about any stock nor is it intended to be a recommendation to buy, sell or hold any stock investment. We suggest speaking with your financial professional about your situation prior to investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice.