Today we are going to look at some of the myths of investing. These are secrets that will allow you to create your own wealth and retire with a great nest egg!
Myth 1: Investing is difficult.
That's what the financial services industry wants you to believe! They make their money off of your hard-earned income because investing is "way too complicated for you, the common fool." If people realized how simple investing can be, the financial services industry would take a huge hit. It benefits them GREATLY to convince you of this!
Myth 2: You need a financial advisor.
Yes, according to government regulations on 403b accounts, you must use a financial service and their local advisor. But by following our recommendations, you will be the one calling the shots and telling your advisor where your money will be invested. Think about it.... Who has more at stake with your hard-earned money? I guarantee that answer is YOU! Beware! Your financial advisor will use scare tactics to make you believe that you need his advice. Erroneous! You put together a solid retirement package that fits your goals.
When I took control of my financial future 18 months ago, my financial advisor tried to convince me that I was in the correct investments. When I looked at what he had invested my money, I found that I was losing 1.65%/year of my money to fees!! Those are ridiculous rates! My advisor tried to say that the funds were great because they had earned 16.5% the previous year. But I knew that the market had returned 17%! The fund hadn't even matched what the market returned, AND I had lost 1.65% of that amount to fees! My advisor is a nice guy, but I am in charge of my financial future, not him!
Myth 3: Investing is gambling.
I will start by saying that investing does involve risk. Your account value may go down sometimes. That's what the market does. It goes up and it goes down, but look at the all-time trajectory of the stock market below. It ALWAYS goes up! That's why the stock market is a long game. It's not like gambling where you are trying to get rich quick.
Myth 4: You must use your 403(b).
Your 403(b) can be a great tool for you to grow your wealth and build a strong retirement, BUT you don't have to use it. That being said, you MUST contribute up to your school's match. That's a 100% return on your investment, but after that, you need to analyze your financial situation and plan to make sure that you are investing in the proper accounts. Remember, you can't access the funds in your 403(b) before age 59.5 without a 10% early withdrawal penalty. Always check to see if your district offers a 457 plan. If so, they have significant advantages over the 403(b) plan.
Myth 5: You have to research stocks to invest.
Teaching 6th grade and coaching football takes up a LOT of time. I don't have time to research individual companies and find which ones are solid investment choices. I'm guessing you don't either! That's just fine. There are ways of investing that don't require you to buy stocks in individual companies. There is this great investment vehicle called an "index fund". It's like buying a little bit of every single company in that fund. You spread out your risk over many companies. We will talk in detail about index funds in a future post.
Myth 6: Putting money into savings is investing.
Saving money is ALWAYS a good thing, but it is not the same as investing money. Even though putting money into savings is very safe, you are actually losing because the current savings rates of just over 2% do not even keep up with inflation. You HAVE to put your money to work for you in the market. Think about it, you work hard for your money. Isn't it time to get your money working for you???
Myth 7: You have to be an active investor to make money.
People believe that you must constantly buy and sell stocks to make money. That's true, for your financial advisor or brokerage. Every time you make a trade, you are paying them a fee. You are also creating capital gains that you have to pay taxes on. Setting and forgetting your investments will make you much richer than constantly monitoring and changing your investments. This passive investing is the way to a rich life!
Myth 8: You can time the market.
The market goes up. The market goes down. And nobody knows exactly when these swings will happen. Some financial advisors will beat the market average one year and come up well short the next. The most famous person that has been able to consistently beat the market is Warren Buffet, and he has access to information and buying ability that the average investor doesn't have. Even he says that the best thing the average investor can do is passively invest in low-fee index funds to grow their wealth.
Myth 9: Investing is only for "rich" people.
This myth is kind of a self-fulfilling one. Most people who aren't considered "rich" have parents who weren't "rich" themselves, so the concept of investing money was never talked about as they were growing up. They may have learned about the importance of savings, but they don't realize that saving money actually is losing money. Even the top savings accounts only pay just above 2%, so you aren't even matching inflation at that rate. Invest that money into low cost index funds and watch your money grow over time!
Myth 10: Stocks are a get rich quick scheme.
We've all heard stories of people that bought a company like Amazon at $2/share, and now are multi-millionaires. There are actually many more stories of people that gambled on those kinds of stocks and lost their entire investment. The stock market is a long game. You stay patient and "play" it for 15 to 20 to 40 years, and you will make money! If you find yourself chasing those get rich quick stock tips that you will find all over the internet, press pause and remember that these people make their money by getting suckers to pay for their "hot tip"! Don't be one of those suckers!
Keep stackin!