If you’re a college student who is interested in one day reaching financial freedom, then you
have undoubtedly encountered dozens of untrustworthy ‘investors’ who promise that by using
their secretive new algorithm, you’ll get rich quick. As you begin your investing journey, it’s
important to know what tactics might work and which ones are just myths you should ignore.
Let’s delve into some of those myths, and provide some ways to avoid falling for them.
Myth #1: All You Need to Do is Time the Market
If you’ve ever seen one of those TikTok investors talk about their investment strategy,
they usually mention how they ‘buy low and sell high’. Sounds awfully simple huh? Well, that
strategy doesn’t really work, especially not in the long term. In fact, most research on this topic
says that regularly investing in high-quality stocks and index funds will regularly outperform
timing the market. The bottom line here is that timing the market is incredibly difficult, as it can
fluctuate by the month, day, even hour. Trying to find the best possible time to invest and sell is
not only underperforming the market, but it’s also incredibly stressful. If you want a tried and
true, stress-free investment strategy, then invest in index funds and simply wait. As Kenneth
Fisher said “Time in the market beats timing in the market.”
Myth #2: You Should Become a Day Trader
Another very popular trend recently is day trading. Day trading is making dozens of very
fast trades with incredibly high leverage. This strategy is extremely high-risk / high-reward.
Online day traders will show you their 500+% returns and focus on how they make these returns
in one to two hours. While this might sound like an exciting opportunity to make lots of money,
it’s important to understand that, in most cases, day trading ends in losses instead of gains. The
inherent risk involved in day trading means that while you might make some money on a few
trades, you will usually lose money across the long-term. Day trading is like trying to time the
market within seconds or minutes-long exchanges. Many of the issues you see with timing the
market are only compounded in day trading. If you are risk-averse or want to avoid stress, then
you should really avoid day trading.
Myth #3: You Need Tons of Money
One thing that might be stopping you from investing is that you think you need
hundreds or thousands of dollars to start up an account. While that might be true for more
traditional brokers and banks, thanks to the investing apps out there, you can now
begin investing with as little as $5. If you want to begin your investment journey and haven’t
known where to begin, just know that now there are countless apps and services that provide
partial shares and other services to make investing easy. It might still be intimidating, but if you
follow a low-risk strategy and only invest in index funds, high-quality blue chip stocks and
bonds, then you should see growth over time.
Myth #4: Investing is Just Like Gambling
If you’ve ever spoken to someone who is against the stock market, they might have said
something along the lines of “the stock market is glorified gambling.” However, research shows
that this just isn’t true, especially if you have a safe and stable investment strategy. Had you opened a balanced investment portfolio in 1994, then there would be an 80% chance that you had made money. Let’s compare that to the 50% chance of
success you have with gambling. Unlike gambling, investing does involve an element of strategy,
and by following a safe investment strategy, you will more than likely see positive returns in the
future.
It is important to remember that investing is a long-term strategy. You might not
see returns in the next month or two, but across years of steady investments, you will
undoubtedly see gains. The best strategy and the one followed by most financially successful
people is steadily investing in index funds and blue chip stocks. This strategy not only has been
proven to work, but also creates a lot less stress than any of those get-rich-quick schemes you
see on the Internet.