With inflation outpacing wage growth and traditional savings accounts offering minimal returns, more people are looking for ways to make their money work harder. But the idea of investing is clouded by misconceptions that prevent them from taking the first step.
We’ll dispel some common myths around so you can make a more informed decision on how and where to invest your hard-earned cash.
Investing is only for the rich
One of the most persistent myths is that investing is reserved for the rich. This misconception stems from the past when the stock market and other forms of investing were less accessible. Today, thanks to low-cost investment platforms, robo-advisors and fractional shares, virtually anyone can start investing with as little as £1.
The rise of digital trading platforms like Tradu has made it easier for beginners to start investing in markets such as forex and commodities, especially as many offer free learning resources.
Investing is far too risky for most people
While it’s true that all investing carries risk, the idea that it is excessively risky overlooks one important detail: time in the market often outweighs timing the market. The longer you stay invested, the more likely you are to see positive returns, especially if you diversify. While the market can fluctuate in the short term, investing in a balanced portfolio over a longer period can mitigate these risks.
You need a big pot of money to start
In reality, many platforms have removed high entry barriers. Exchange-traded funds (ETFs) and index funds now enable investors to buy into diversified portfolios with minimal investment. As a result, you can begin with small amounts and build your portfolio over time.
You should time the market
A commonly held belief is that you need to wait for the right time to invest. However, trying to time the market is not only difficult but often counterproductive. Staying invested over time, even through market downturns, is often more effective than trying to predict highs and lows.
Property is a safe bet
While property has long been considered a secure investment, it’s not as foolproof as many believe. Volatile interest rates and tightening mortgage lending rules can make property less affordable, and it’s not uncommon for housing prices to stagnate or even fall.
Property also comes with significant upfront costs, taxes and ongoing maintenance expenses, all of which can reduce overall returns. Diversifying beyond property into stocks, bonds or other asset classes can offer more balanced risk-adjusted returns.
Investing gets you rich quickly
Many people are drawn to investing with the belief that it will make them wealthy overnight. In reality, successful investing requires patience, research and a long-term strategy. The average stock market investor reaps rewards by compounding returns over years or even decades, not by chasing speculative trends or “hot tips.” If something seems too good to be true, it probably is.
Finally, remember to make sure that any investment platform you use is regulated by the Financial Conduct Authority, which can provide peace of mind that your consumer rights are protected.