Six common misconception beginners have about investing

Jodi-kay Williams

The hardest part of investing is starting. The idea of investing can be very intimidating, but what if I told you some of the biggest reasons you haven’t already started aren’t really that big.

There’s definitely been more interest in the idea of investing since the start of the pandemic. People are trying to secure the bag just in case the world shuts down again, but more talk doesn’t necessarily mean more action. People are still timid about investing, especially on the stock market, and I can see why.

Let’s break down six of the most common misconceptions about investing.

• It’s too complicated

Many people resist investing because they think it’s too complicated and that they need to already be in finance to understand. Not true!  I know it can be overwhelming, especially if you don’t have a financial background, when terms like securities, mutual funds, prospectus, and return on investment start getting thrown around, but you don’t have to have a finance background to start investing or to open an investment account and use a financial advisor.

Financial advisors can break down the market to you and help you understand what types of investments might be the best for you. YouTube is also a tremendous help; you can find tons of channels – like mine – that will break down financial jargon into easy to understand words.  My ‘Investing for Beginners’ playlist gives you a good rundown of things you’ll need to understand before investing on the Jamaica Stock Exchange.

• I need a lot of money to start

Another reason people don’t invest or delay investing is that they think they need a lot of money to get started. I think this might be some people’s biggest roadblock. The feeling of “oh, I need $100,000 saved up before I can start investing”.

No, you don’t. When it comes to investing in the stock market, it’s true that the price of some securities is higher than others, and buying in can be expensive, but there’s a saying, “Never invest more than you’re willing to lose.”

Start small. I recently met a security guard who’s an avid investor.  He started with just J$1000.  Find a company that you believe in or a small property that you think has promise, consult your financial advisor and start there.  

The truth is, most companies don’t start off with Tesla or Amazon stock prices. They get there eventually.  As the company grows over time and becomes more valuable, it’s stock price rises. Some companies, especially here in Jamaica, have reasonable prices and minimum purchase amounts. There are several stocks that cost less than one Jamaican dollar per share. Additionally, under JSE rules, the minimum trade is 100 shares, so technically, you could start with less than J$100, but of course there are fees that bring it up. 

Here’s a recent example. Fuel distribution company Fesco recently announced its IPO with a stock price of 80 cents and a minimum purchase of 1000 shares. That means that for as little as $800, investors were able to buy into the company. Just be honest with yourself about how much money you have and start there.

• I’m too young or too old to start investing

Now somewhat connected to the idea that you need to have a lot of money before you invest is… age.

Young people tend to delay investing because they think it’s something that older, probably more established, and financially stable people do.

Let’s just set the record straight now; you’re never too young to start investing. If you’re under the age of 18, you will need an adult to open the account and make you a joint holder though. 

As a matter of fact, you’re never too old to start investing either. You know some older folks might think they’ve missed their chance.

It’s all about finding the right investments for you and your money. Come up with a game plan, do some research, watch YouTube videos, consult a financial advisor, figure out what options are best for you in your season of life. Do you want to invest in stocks, gold or property? How long do you want to hold on to these investments?

Some people decide to hold on to stocks for a year and then sell or sell once it hits – or falls – to a specific price. What’s your limit?

• I’ll get rich overnight

Speaking of holding or selling stocks, don’t go into investing thinking you’ll get rich overnight.  Investing, for the most part, is long term and requires patience and persistence.

The stock market, for instance, is notoriously unstable, and stock prices fluctuate all the time. 2020 and the COVID-19 pandemic showed us that for sure, but history has shown us that the market always rebounds, sometimes quickly, sometimes not so quick.  You have to be willing to ride the rollercoaster, knowing that the lows won’t always be low, just as the highs won’t always be high. 

• It’s a gamble

That rollercoaster is also one of the reasons people shy away from investing. It feels too much like gambling.  There are risks associated with investing, but there are risks associated with almost everything in life. Investing is not the same as gambling because here, you’re taking calculated risks. 

The way stock markets are set up, companies have to disclose their financial reports every three months and at the end of the year. They also have to report on management changes and a ton of other stuff that increases transparency. So, you’ll be able to track a company’s progress and see if it’s the best investment for your money. Public companies, the ones that you invest in on a stock market, answer to their shareholders and are obligated to justify every decision. That gives you a certain amount of power and peace of mind about your money.

• Stocks are the only way to invest

Finally, don’t forget that stocks aren’t the only way to invest. Many people look at the volatility of stock prices and get scared because they don’t want to lose money, but buying stocks isn’t the only way to invest in a company. You can look into bonds, see if that might interest you. I have another video talking about the difference between stocks and bonds. You can click the link up here or in the description below. 

You can also look outside the stock market for investment options. Is property investment something that might work for you? What about cryptocurrency or gold? Having a diversified portfolio is crucial to success.  Just remember that investing is all about what’s best for you and your money. 

Categories: MoneyMondaysJA