According to Robert Kiyosaki in his financial management book, “Rich Dad’s Cashflow Quadrant”, everyone can be categorised according to how they make their money:
- Business owner
Regardless of which category you start from, your end goal is to build wealth in order to achieve various goals in life.
The ability to earn money does not guarantee success in building large and sustainable wealth. Hence, financial management skill is very critical to ensure money earned is managed well via financial planning and investment.
But, there are many misconceptions about investing. People, especially youngsters, have misunderstandings about investing early or investing in general.
So, TED Optimus, a FinTech company, is here to debunk these 5 common investing misconceptions that stop you from achieving financial freedom and realising your life goals sooner.
Misconception #1: Investing is for the rich.
Some people especially younger people do not invest in the stock market as they think they need a lot of money to start investing.
But the truth is that you can start investing in the stock market with as low as 100 units of shares i.e. less than RM100 to own a stock priced below RM1.00.
So, the key to investing successfully is to learn how to invest and take action as soon as possible. Investing in the long term with the dollar-cost averaging (DCA) strategy is one of the best ways to grow wealth over time.
Divide up an amount to be invested across a fixed period of time. For example, you invest RM200 in stock no matter whether the market is going up or down. This is because periodic purchases of a target asset can reduce the impact of volatility on the overall purchase.
In short, aim for long-term gain instead of short-term gain.
Misconception #2: Investing is very risky because most people LOSE money!
In the trading world, most people tend to focus on the “loser group” and losing results. Maybe 70% of people who trade in the market lose money.
But there are also about 5 to 10% of participants who make money in the stock market (i.e. the rest break even or lose money).
The question is: Why don’t we focus on learning how they beat 90 to 95% of the people and become winners?
Investing is like any other type of sports, game, or business venture. It is only risky if you do not spend time and effort to understand it and master the skill to become a winner in it.
If you are scared of making a direct jump into it without any knowledge, there are many websites providing investing education. Here are some websites where you can get lots of proper and good financial education:
- Securities Commission Malaysia
- Bursa Malaysia
- TED Optimus podcast
- Weekly trading and investing newspaper articles in Chinese
- Webinars organised by Bursa Malaysia and brokers
Misconception #3: The stock market is speculative and manipulative.
Many beginners and veterans in the stock market are aware of market manipulation. Many losers even blame the manipulative stock price movement as the main reason for their losses.
But the question is, “What kind of business does not involve risk and only has pure profit potential?”
If we understand taking risks is part and parcel of making money from any industry, blaming the market or avoiding it altogether is not the right approach.
Instead, we should learn how to avoid losing money within the “risky” environment and become winners.
The correct approach to facing risk in any investment begins with asking one question, ”How did other ordinary people make money from this ‘risky” environment?”
Once you realise their secret—never give up, keep on learning and practising—and implement yourself, one day you will be in the top 5 to 10% winner group as well.
Misconception #4: The stock market is a casino.
Bursa Malaysia and stock brokers facilitate the trading of stocks between buyers and sellers. It is up to the buyers and sellers who create the “casino” environment in the stock market by gambling instead of trading or investing.
The “gamblers” buy and sell stocks without learning the necessary skills and knowledge before they trade in the market.
However, real traders and investors put in the effort to learn proper trading and investing skills before they participate in the market.
Misconception #5: Investing is only for those people who have finance, accounting and business-related background.
Everyone can do investing either directly or indirectly. If you have the relevant background or experience, you can do it directly such as investing or trading in stocks.
Otherwise, you can always seek investment advice from licensed investment advisors, unit trust agents or financial consultants from a financial institution, even if your education or work background is not related to investment at all.
As long as you have the heart for learning and practising in real life, are not afraid to take risks, and are ready to achieve your financial goals, you should try to invest your money. Putting your money stagnantly in the bank might be the worst decision when inflation is at an all-time high now.
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Disclaimer: The content of this article is not investment advice and does not constitute any offer or solicitation to offer or recommendation of any investment product. Do your own research before involving in any investment product.