What are some myths about stock trading do you think keep people from investing in the stock market? I've heard it said for example that the stock market is driven by fear and greed and I think that those who for some reason feel "greed" is a vice they'll not embrace opt to give the stock market a wide berth. Do you agree with that supposition that for one to make good money in the stock market they must be driven by "fear" [sell when you think prices will plummet] and "greed?"
People that don't invest usually do it because of two things: they have lack of capital or they have lack of knowledge. The last can be particularly scary for the investor..
That you can lose everything you invest, or that you shouldn't invest anything you can't afford to lose. Unless society as we know it somehow collapses, a properly diversified portfolio will not lose all of it's value. It can lose a large part of it's value, but not the whole thing. And if society indeed collapses, then money won't matter anyway so no harm done.
There're too many myths when it comes to stock markets or forex trading. Some people still think that some brokers chase their stop losses on mini lots when they trade forex without realising that it happens just because they didn't do proper analysis in the first place.
Well, you can't lose everything, but you can lose the greater part of it and you could consider it losing it all. Let's scale it down and say you have $100 and you wake up one day and you only find $5, would you be grateful that you still have those $5 or focus on the $95 you lost?
I think the stock market is very scary to the majority of people because they don't know how to navigate through it. They don't even know how to start in the first place and because of that it makes a situation that much more difficult for them. Throughout time people have been afraid to invest their money in the stock market because they feel like it's a scam.
A 95% index drop won't be happening. It just won't. As long as people are alive and governments are functioning, you will own parts of a company that sells products to people. Anything that would lead to a 95% drop in my opinion needs a huge worldwide catastrophe kind of thing.. and like I said in that case you don't really care about money anyway. In 2008 the S&P500 fell just over 20% in one week. And if you kept your cool instead of selling on the bottom you will have nice profits now even if you went all in the day before the crash. A well diversified portfolio that you don't play around with will NOT lose all (or a super high like 95%) of it's value unless the world as we know it comes to an end.
The most common myth I hear is the notion that you can somehow totally eliminate risk, losses, etc - usually the day trading crowd and the annuity-only crowd convince themselves of this before jumping in. And people often hear of someone losing everything in a Ponzi scheme, and wrongly assume the money was all "lost in the stock market", when actually no money was even invested - it was stolen and spent by some crook who conned the investors. NOT an investment loss at all - big difference.