Do you find yourself ignoring that stock app on your phone? Or if you opened it out of curiosity, were you instantly overwhelmed because the stock names looked like a foreign language?
If so, you’re not alone. About 80% of millennials are not invested in the stock market and nearly 34% don’t know how to do so, according to a new Harris poll conducted by investing app Stash. Luckily, the stock market isn’t as scary as it seems. If you want to feel less overwhelmed about it all, look no further. Check out some common myths about the stock market below, because what you think you know about it may not be entirely true.
1. The stock market is too complicated.
It all may seem intimidating, especially if the stock names themselves are enough to turn you away. Fortunately, investing in the stock market doesn’t require any intense algorithm calculating. Educating yourself is the single most important factor. This will allow you to become more comfortable with making decisions regarding stocks. Understanding the terminology surrounding the stock market, researching stocks, and knowing the difference between investing and trading are great starting points.
2. What goes up, must come down.
Aside from your age, the only other time this phrase may not be applicable is when you’re dealing with the stock market. Even though a stock has risen, that doesn’t mean it’s going to go down at some point. What goes up, can actually stay up. For example, some Fortune 500 company’s stocks seem to continually grow. However, there generally is fluctuation. Some factors that affect this up-and-down movement of stocks include: specific company news and performance, industry performance, investor sentiment (confidence), and the economy. Again, educating yourself about the company you invest in is the best way to determine how various factors affect stocks.
3. Investing in the stock market is just like gambling.
There’s a reason stocks don’t come in the form of cheap, scratch-off lottery tickets from your local gas station. Investing in the stock market is not the same as gambling. Gambling is a zero-sum game, and the odds tend to be against the player. The results of the stock you purchase are not solely based on pure luck. When you buy a stock, you’re buying ownership in a company. Although it can be difficult to determine the value of a company, considering all the different variables and developing a strategy will play a role in your long-term success.
4. Stocks are only for the rich.
If your only exposure to the stock market is being aware of the infamous Jordan Belfort and his penny-stock scam that occurred in the 1990’s, your view of investors and stock brokers may be a little distorted. Investing in stocks is not just restricted to the wealthy. It’s easier and more accessible to the public than ever before because transactions can now be handled online. Also, the cost of brokerage (the service of a broker) is relatively low. Some online brokers will allow you to start an account with as little as $500, and a single share can range anywhere from pennies to hundreds of thousands of dollars. Having a basic understanding and doing thorough research of the market and industry will help you feel less overwhelmed and more confident when dealing with the stock market.