3 Investing Myths That’ll Stop You From Being a Millionaire
When I started investing, I was afraid of it for one big reason: I knew next to nothing. I’ll admit, there was a time in my life when I barely knew the difference between a stock and a bond, let alone how to research companies.
But the more I’ve read and learned, the more confident I’ve become as an investor. At the same time, I’ve also figured out how to ignore the many myths that circulate about investing. Here are some that I suggest you stay away from if your goal is to get very, very rich, eventually.
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1. You can only invest if you have a lot of money
Your first financial goal should be to build an emergency fund with enough money to cover essential expenses for three to six months. But once that’s done, there is no reason not to start investing, even if you only have a few hundred dollars to start with.
If your goal is to be a millionaire, there is a long window of investment that could get you there. The sooner you invest money, the sooner your portfolio will generate returns – returns that you can then reinvest to start a healthy cycle of wealth accumulation.
Additionally, these days, with fractions of stocks, you don’t even have to write off expensive stocks that you would like to own a piece of. Fractions of stocks allow you to invest in part of a stock when a full stock is not financially achievable. Fractions of stocks could help you put together a nice, diverse portfolio. And over time, as your income grows, you can move up to full stocks of the more expensive companies on your wish list.
2. You have to invest a lot of time to build a portfolio
I firmly believe in researching investments before diving in. But you may not have the time or patience to go this route. And the good news is, you don’t really need it.
purchase S&P 500 Index funds or exchange-traded funds are a viable alternative to manually selecting stocks. These funds really require little research as they aim to match the performance of the S&P 500 index itself, which comprises the 500 largest publicly traded companies.
Of course, you’ll want to compare different funds to see what their fees and returns are. But you don’t have to spend nearly as much time as you would browse through 15 different stocks, for example, to add them to your personal mix.
3. Stocks are the only worthwhile investment
I happen to be a huge fan of stocks and my portfolio is full of them. However, if you limit yourself to just stocks, you can hurt your chances of getting rich.
An ideal investment portfolio is as diverse as possible – and that doesn’t just mean buying stocks from different market segments. It also means owning different types of assets.
Besides stocks, I’m a big fan of REITs or real estate investment trusts. REITs are traded like stocks, only they don’t necessarily follow the pattern of the broad stock market. That means REITs don’t necessarily follow suit when there’s a time when stock values are falling.
While I don’t currently own any investment property, I firmly believe that physical property is a great asset-building tool. Investing money in an investment property can generate a significant source of income from the rent you earn and once you have covered the cost of owning that property the rest of your proceeds can be invested in additional growth.
Finally, let’s talk about bonds as a viable investment. Bonds tend to get a bad rap outside of the retirement savings context, but in reality they may find a place in your portfolio. Municipal bonds, for example, offer steady interest payments that are always federal tax exempt and, when paired with other investments, could help make a nice, balanced portfolio.
Equip yourself with knowledge
There is a lot of misinformation out there about investing, and knowing which myths to avoid could help you get closer to your goals. The truth is that if you really want to become a millionaire, you must consistently save and invest your entire life. But when you commit to it and step in armed with the right knowledge, you can put yourself in a solid position to get rich beyond your wildest dreams.