Trading in the stock market doesn’t require superhuman knowledge, but neither does it require simple luck. If you’re thinking of online trading Australia stocks, or if you’ve been trading for a while now, you’ve probably heard quite a few things about investments that aren’t necessarily true. Before you make another trade, read up on the top five stock market myths that all traders should know about.
1. The Stock Market Is for the Rich
There are affluent people who make all or the bulk of their income with shares. However, that doesn’t mean that the stock market is purely a rich person’s realm. The stock market is accessible to anyone, as you can buy one share of a certain company’s stock for less than you’d spend on a cup of coffee. The stock market offers the average person the chance to see real growth in their investments.
2. All Stocks Recover Eventually
The stock market often fluctuates, and what’s hot today could crash tomorrow. Some shares fluctuate in value a little less dramatically, but you should be able to spot a downward trend over a period of time. It’s a mistake, though, to assume that your investment will recover eventually or to assume that shares at extremely low prices are a “must-buy” sure to go up in value.
While it’s true that a market-wide crash tends to see a recovery after a time, an individual company that experiences a downward turn isn’t necessarily going to recover. You should keep a careful eye on your portfolio and any industry news related to the shares you own. If you see a downward trend with no hope of a comeback, it’s wise to sell before the price drops even further. If you wait for the shares to “recover” in value, the company may collapse and you’ll be left with absolutely worthless stocks.
3. Playing the Stock Market Is Like Gambling
Winning while gambling is often 100 per cent luck. There’s nothing a gambler can do to get three lucky 7s on a slot machine or the perfect hand at the card table. Playing the stock market is a risk, but it’s not at all reliant on luck. If you do your research, you can make informed buying and selling decisions. Anyone who consistently loses money in the stock market isn’t a victim of bad luck but of uninformed choices.
4. It’s Okay to Jump In at Any Time
It’s always a good time to invest, especially if the market is trending in an upward direction, right? Wrong. As The Wall Street Journal explains, you won’t be able to count on a broker to tell you when it’s a good time or a bad time to invest because they always want your business, and they make money whether you do or not. You’ll have to do your own research. A broker, or better yet, an online brokerage website, can assist you in gathering information and understanding what it means to your investments. However, you’ll have to draw your own conclusions and make the final decision to buy or sell.
5. You Don’t Need to Know Much
While it’s true that you don’t have to become a full-time stock market analyst in order to do well in the stock market, don’t make the mistake of thinking you don’t need to know much at all. Sign up for an online broker website, if only to keep up with the latest news and information. Look for the patterns in different industries and anticipate the trends. Simply logging on and buying and selling shocks based on the latest chart you see isn’t enough to secure your investment in the long run.
As in most things in life, knowledge and awareness can take you quite far in the stock market. You can make money on the stock market without devoting your entire life to share trading; however, you should get informed before you start risking your investment.
About the Author: Crystal Conley is a contributing writer and business and finance supervisor. She loves busting stock market myths so that more people feel comfortable seizing the wealth of investment opportunities in the market.