At Last! Stock Market Myths

Among the various myths and misconceptions in existence, few match the mystique of stock markets from the eyes of a layman. The stock market and all things associated with it are often seen by many people (who’re vaguely familiar with it at best) as something bearing a huge hidden risk. That’s really not the case. Yes, there is risk, but quite frankly, dealing in the market doesn’t mean you’re dealing with the devil. In fact, we’ve compiled some well known myths about the same. Here is a list of ten myths about the share market.

• Stocks = Risk!

That’s not true. The main function of stock investment is wealth creation. Investing in stocks sensibly over a long period helps create wealth for the investor. The key to investing in the share market is discipline. Learn to build a portfolio that offers you steady growth and diversify your holdings. Any investment carries with itself an element of risk.

• No Broker = No Profit

The reality is that the working of a stock market is not the simplest thing to understand. Hence, if a person takes some time out to actually understand and gets to know the manner in which the market works, he would naturally stand to make some gains out of it. You do however need to invest some time in it and with experience; you’ll become a great investor.

• Buying Stocks = Gambling

One of the oldest and widely circulated myths about the market is that venturing in is nothing more than gambling. The biggest function of equity market is wealth creation whereas no wealth is created in gambling.

• No Market for Old Men

Age has nothing to do with your competence in the stock market. Regardless of your age, you should pick healthy, growth-oriented companies to ensure a profitable portfolio.

• You don’t need to know a lot

If you want to succeed in the market, you need to know everything there is to know about the stocks you’re investing in. Warren Buffet endorses the fact that you should know everything about your stocks and the sector. If you hire a good investment advisor, he will always be on top of the knowledge game and offer valuable advice.

• Always buy when stock price is low

This is not true all the time. Please don’t assume that stocks which are down will rise again. There are no guarantees of the same.

• Always sell when Stock is rising

As with the previous point, this is again not true all the time. If stocks are rising, the outlook may be promising for the company and it may move on to bigger things. Thus, it may not be the best time to sell the stock.

• Fallen stocks will rise again

This is an area where many investments falter. This is not true at all. There are a host of reasons as to why stocks lose their value. Intrinsic, as well as extrinsic factors are responsible for the fall and as a result, there is no guarantee that fallen stocks will pick up pace and rise in value.

• Stocks that have rallied will fall

If a business is doing fine, there’s no reason why its stocks should tumble on day. There might be some movement on a daily basis but that’s merely an indication of certain relevant factors in the market.

• Market forecast should be precise

Even Nostradamus couldn’t predict the fortunes that lie in the stock market; Case in point – SENSEX. While certain things can be deduced, the market is not an exact science. As an investor, patience is the key – long-term plan has been seen to create more wealth over short-term gains.

Kotak Securities Ltd is one of the oldest and largest stock broker in India. We offer you investing facilities in various instruments like equities, derivatives, currency derivatives, Mutual Funds, IPO and online stock trading services, through our branches and the internet. You can know the latest market updates on Kotak Securities Blog