The Stock Stethoscope

In this article, we aim to dispel five myths which can prevent you from venturing into the markets and result in a lost opportunity.

MYTH 1: TRADING OR INVESTING IN THE STOCK MARKET IS SIMILAR TO GAMBLING

This is one of the biggest myths surrounding the stock market for ages. Most investors feel stock market investment is similar to gambling where there’s a possibility of only losses. However, it’s not true. Stock markets create value as purchasing a stock of a company is equivalent to ownership of a company. As an investor, you are eligible for receiving a part of the company’s profit. Gambling, on the other hand, doesn’t create any value as you don’t become owner of anything. Also, the concept of zero-sum game, where the amount won by one equals to the combined losses of others, that exists in gambling doesn’t exist in the stock market.

MYTH 2: INVESTMENT IN STOCK MARKETS REQUIRE A LOT OF MONEY

Billions of money are traded every day in the stock markets. However, that doesn’t mean that you need a huge sum of money to kick-start investment in the market. As surprising as it may sound, you can make an entry into stock market with as little as Rs. 100. Billions are traded every day in the stock market. However, that doesn’t mean that you need a huge sum of money to kick-start investment in the market. As surprising as it may sound, you can make an entry into stock market with as little as Rs. 100.

NB: The issue price per share of the tech giant INFOSYS was Rs. 95 in 1993. Those who had purchased even 100 shares of the firm back then and held it until today have made quite a fortune in all these years.

MYTH 3: STOCK MARKETS ALWAYS RESULT IN LOSSES

Without a doubt stock markets are often volatile. However, losses are suffered primarily by those who invest without getting their basics right or panic and exit investments following short-term volatility. Stock market investments are a different ballgame that requires patience and a sound understanding of the market dynamics.

It’s also essential to avoid a herd mentality and timing the market. It’s almost impossible to time the market and hence it’s important to remain invested for the long haul. It’s better to seek professional help if at all required.

MYTH 4: RISING PRICES OF STOCKS WILL COME DOWN

It’s another common myth of the stock market. If a company has sound fundamentals, it is not necessary that price of its stock would come down in case it’s trading at a higher price. Therefore, prior to buying a stock of a company, it’s essential to find out about the company, it’s financials, its management principles amongst other things. This type of informations can be found on the company’s website as well as various other platforms like screener, ticker tape, money control, various news channels and business pages. Also, it’s vital not to make a decision based on short-term returns.

MYTH 5: YOU ALWAYS NEED HELP OF BROKERS TO INVEST

No you don’t! If you possess sound understanding of the market and have the time to track market movements, you can invest on your own. All you need is a demat, bank and a trading account. While the dmat account allows you to hold shares in electronic format, the trading account is required for conducting stock trading activities. And we all know and probably have a bank account.

These 5 myths mentioned above about stock markets need to be dispelled at the earliest to gain maximum mileage. Start your trading/ investing journey as early as possible to make the most from the markets. Start with a very less amount, spend time learning about the fundamentals and technicals of stocks, learn from your mistakes and within a few months you will know when and how much money to put in on the right stock (s).

(Myths are public dreams, dreams are private myths)