Investment is a long term concept, especially if you want to make more money out of it. However, more often than not, investors tend to have a lot of wrong notions and misconceptions about stock market. It wouldn’t entirely be fair to blame them because somewhere, the internet, existing investors and many other financial entities unintentionally set these wrong notions. Some statements can no doubt be much more hard hitting and dangerous than the other ones.
Investors who are just starting out often want to earn higher returns but often get misguided with these set notions. So without further ado let’s take a look at the 10 silliest and most dangerous things people say about stock prices:
1. “Already lowered stock prices won't direct downwards anymore”
One of the most common misconceptions of people regarding a stock price is that if the price is already low it can’t go down any further, because they have a hope that things will get better and they will earn higher returns in the future. But this is not always the case.
For example, if a scam of a particular company unveils then that company’s share price will notwithstanding where it was in the previous stages.
2. “Already hiked stock prices won't rise higher”
This is yet another mistake on the part of the investors. However, in this case, they might even give away the opportunity to earn higher returns and make more money. Many blue chip companies run on their fundamentals which increase the prices of their stock. Investors often don’t have the proper knowledge about the company and thus tend to withdraw their investment sooner than needed, ending up with comparatively lesser amount of profit.
3. “It can be readily understood when the stock price is at its minimal.”
This brings us again to the fundamentals of the company. Knowing ifthe company policies and business ethics are fundamentally good will always help the investors determine how to make more money by investing in them. But in case the fundamental is not well established then the stock prices will continue to fall and nobody can usually predict when the price of the stock is lowest or could hit rock bottom.
4. “Lesser the face value of equity, lesser the amount of risk incorporated.”
The amount of risk taken is always the same i.e. a stock priced at rupees 5 and a stock priced at rupees 50 could carry the same amount of risk. Both these stocks can go south and the investor may be losing less money if he has rupees 5 stocks but still the risk factor or the percentage of loss is still equal. Here the primary motive is not to make more money but to play safe and incur the lowest loss possible.
5. “At the end of the day, they will all come back.”
High-frequency trading is not at all an option if an investor believes in this statement. It’s not set in stone that every time a stock price falls, things will come back to normal. For example, CD and DVD makers were the highest market gainers a decade ago but they are unable to make a comeback in today’s day and age.
6. “Obscurity before dawn”
It is not always possible to ascertain that there will be dawn after the darkness, there can also be a complete black out. The business environment is uncertain and hence cannot be predicted accurately most of times. This is why there are multiple options available to the investors, like High-frequency Trading, scalping and more, which are basically trading means that offer profits to the investors from small price changes as well.
7. “After it rallies, I'll sell.”
It is not a good belief to hold, especially if an investor wants to earn higher rates, as a rebound rate may take several years to come around or may even never come back. Scalping on the other hand, may be a relatively good option to those investor as he can make up for the rebound rate, but proper knowledge about the investments should be present in the investor, as scalping involves making money from small price changes and a large loss may eliminate all the accumulated profit.
8. “Fluctuations in conventional stocks don't generally occur”
There isn’t a single business in this world that is not uncertain and hence it is safe to assume that there is no stock in the world that won’t fluctuate, even those of the blue-chip companies.
9. “Forbearance is the key”
Patience is the key. Not everyone can indulge in high-frequency trading and starting creating wealth because that’s far too risky and that should not be a common practice, especially for investors who are new to this.For most newcomers, patience in their investment journey is the key.
10. “Money lost because I didn't go for it”
In this case, the investors regret not buying a particular stock which is giving higher profits in the current time because they were too scared to make the leap. Most of the times it is this fear of missing out that plays with the minds of the investors.
Stock market was never a simple endeavor but what makes it all the more difficult it myths like this! If you do your research right and have your financial goals set in place, then investing right is just a matter of time.