Have you resisted or curtailed your investing because you aren’t confident about where or how to invest? Don’t let the five investing myths below hold you back. Investing in the stock market or choosing 401(k) funds doesn’t have to be complicated or even risky.
1. Men are better than women at managing money.
In previous generations, women had less access to money than they do now so it was common to hear “my husband takes care of that.” As our world has evolved, not only is this less common, but we’re also seeing that women are making better investment decisions than their male counterparts. These days, we’re seeing that female fund managers freak out less, manage their risk well, and outperform male fund managers.
2. Investing in the stock market is difficult.
We know that investing can feel overwhelming, but it doesn’t have to be difficult or complicated. Nowadays there are a lot of options to choose from to make this easier for the average person. Some of these options include robo-advisors, apps, target-date funds, and using a financial advisor. These tools have brought down the barrier of entry into the stock market for even the most novice investor.
3. I can’t invest until I have a lot of money.
We regularly receive requests from individuals who say they want to start their portfolio only to find out that they’ve been investing for years without even realizing it! The most common way in which this happens is through signing up for your 401(k). Most plans allow for contributions as small as 1% of a person’s income. So you don’t need to be a millionaire to start building your wealth.
4. Paying fees to an advisor will decrease my return on my investments.
Price is only an issue in the absence of value. So while it is possible to hire an advisor and wind up worse off, this isn’t the norm. Vanguard published a study that found that an Advisor’s Alpha (their value) can add up to 3% in net returns. So with the right framework and process, your investment with an advisor should pay off.
5. Investing is really risky.
Investing in the stock market can be risky, but honestly, it depends on what you’re investing in. Returns aren’t guaranteed, but there are a lot of investments that come with lower levels of risk. Bonds, fixed income, and cash equivalents are some examples. The exact investment within these asset classes will determine the level of risk you’re taking on, plus holding them in a diversified portfolio will help to balance your total risk and reward. The bottom line is that investing doesn’t have to be super risky if you don’t want it to be.
Only 55% of Americans are invested in the stock market, and you can see these myths may be some of the reasons they avoid investing. But investing can help you build wealth, generate income, lower taxes, take an early retirement, or reach other financial goals. Merino Wealth can help you create a personalized, comprehensive financial plan that includes smart investing to reach your goals. Get started today.