Individual Stocks

Selecting Individual Stocks

What are some common myths or beliefs that limit what I may earn as an investor?

Experts at both Investopedia and NASDAQ believe potential investors may have certain inaccurate beliefs about investing that may cause problems when you first invest. One belief is that stocks that plummet in price eventually will bounce back, which is not necessarily true. The reasons why a stock drops in value may be complex in origin, and good research on the investor’s part may help limit losses in this environment. Another belief may be that people who actively trade stocks and manage their personal portfolios are part of some sort of exclusive club. This is simply untrue, as many millions of individuals actively engage in learning and managing personal stock portfolios, either indirectly through brokers and advisers, or directly through their retirement plans and personal investments. Another widely held belief may compare the investment in stocks to gambling in Las Vegas. This is also an erroneous belief, as with proper research, risk analysis, long-term strategies, discipline, and diversification, an investor can actively obtain his results without ever having luck involved in the equation. Yet another widely held belief is that stocks that rise in price over time must always come down. Many experts assert this is simply incorrect, as some companies are so well managed that their stock price may continue to rise even when purchased at a high point. Over a longer period of time, the stock’s price may continue to rise. And finally, that only a bit of knowledge about the complexities of investing in the market is enough for all of us to invest in the market. This belief may also cause many problems with new investors, as it takes a considerable amount of learning, training, and understanding of this complex system in order to do well as an investor.


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