There are a lot of myths and lies traveling in the investment industry conversation to conversation but nothing can match the severe impact of this one. This one lie has induced the levels of mediocrity in investors as it has prevailed over the years. Only a few who dared it could go beyond its high mischievous walls and build empires of wealth.
“Taking big risks is the only way you can create wealth; no pain no gain; you have to bear huge risks to make more money” and lots more, there is an abundance of such statements and suggestions that keeps on iterating. This is the traditional and conventional way of investing, creating wealth and being rich. You tune in to any business channel or an investment talk or have a word with a broker, everyone endorses taking BIG risks. In fact, the professors in colleges and universities preach and teach taking calculated BIG risks. But no one ever dared to ask back how many such BIG risk have they themselves taken? Only a few would answer this positively that too with a downfall story related to it. The fact is that it is not the right approach to building wealth. Even, Warren Buffet, the investment supremo swears by balanced index funds.
Why the misconception?
In most of the cases, there are two reasons why a lie spread-
- There is nothing better people know
- They don’t want others to know the game
There are two main reasons why this misconception has such strong foundations, some advisors do not know much or at least not beyond this myth and the more destructive one is the advisors and investors who have by now understood the real game do not want more people to know about it.
Advisors also preach this myth because, in case of an unsuccessful, low-yielding portfolio, they can always blame the market for corrections and fluctuations and hence poor performance of the funds.
Damage of this myth
The biggest damage this misconception can do is to bar the investors from making profits through safe investment avenues. It prevents investors from going towards safer stocks and makes money without much risks and losses incurred.
What is meant by a Risky Stock?
There are a few common characteristics of all risky stocks;
- They are more expensive than other stocks in the same category
- The company size is smaller than other leading competitors
- There is a lot of volatility in the stock performance
- There is relatively very less or no dividend returned in the past years
A risky stock would possess all or most of these traits. No investor who has even the sublime knowledge of investments would go for such stocks neither would and advisor suggest yet there have been huge investments in such stocks over the years which make people incur losses and yet they fail to understand why did that happen?
On the other hand, a safe stock would show traits which are opposite to the above-listed ones. It would be large, less volatile, cheaper and most importantly would have a history of dividend pay-out.
There are a lot of companies which are big and stable and have paid their investors well over the years you just need to be vigilant.
If you as an investor take out some time before investing in doing a little homework and look for companies which are safer avenues, you can spend the rest of your invested life at peace while creating wealth. You can take expert help to guide you in the right direction, try piggy premier.
Be a Smart Investor!