The world of investing has always been full of people — both charlatans and mere braggarts — who are only too happy to tell you exactly how to get rich.
In reality, building wealth is usually a slow and steady process of investing month after month, year after year, for decades.
Successful investors know this, and often are irritated by the inflated and sometimes downright bogus claims of others.
Recently, Schwab surveyed more than 3,000 clients who are the shared or primary investment decision-maker of their household, and who are at least somewhat engaged with their investments at Schwab.
It asked these investors about myths they would like to debunk so the misinformation doesn’t derail others. Following are the myths cited by the most survey respondents.
1. You need a lot of money to invest
Respondents who said they’d want to debunk this myth for other investors: 23%
Everybody has to start somewhere when it comes to investing. The investors who do best tend to start very young, when they barely have two nickels to rub together.
Getting rich overnight is extremely difficult. Growing wealthy slowly over decades is much easier, regardless of whether you start investing with a little money or a lot.
2. You need to be an expert before investing
Respondents who said they’d want to debunk this myth for other investors: 17%
Warren Buffett is generally regarded as the greatest investor of all time. So, it might surprise you to find out that Buffett believes you can get rich with very little understanding of finance or how markets work.
As he has said in the past:
“By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals.”
To the Oracle of Omaha, it really is that simple: Invest in a mutual fund over many decades and grow rich.
3. Investing is just like gambling
Respondents who said they’d want to debunk this myth for other investors: 15%
Gambling is what you do in Las Vegas. It is not what you do on Wall Street, at least if you are smart about how you invest.
That doesn’t mean you cannot lose money in investing. In fact, if you invest over any length of time, you are virtually guaranteed to see your holdings decline, at least temporarily.
But unlike gambling — where the odds are stacked against you — investing in a broad selection of stocks has historically been an almost surefire way to make money.
You will endure many ups and downs, but investing in a broad-based index fund is likely to work out well over time.
Other myths investors hate
Here are the rest of the myths successful investors would like to debunk:
- You should sell when the market is volatile: Cited by 12% of survey respondents
- Timing is everything when it comes to investing: 12%
- Popular stocks always make good investments: 8%
- An investor’s goal should be to beat the market: 7%
- Investing is rigged in favor of professional investors: 5%