Myths about Investing

In order for my advice to be most effective, you need to drop a few limiting beliefs and myths. It's likely not all of these will apply to you.


Myth 1: The only safe investment is a Bank deposit.

If inflation does not exist, this would be true. Savings accounts have not been paying more than 0.5% interest from 2008 to 2012 yet inflation has been much higher. Money in a savings account is not safe from the losa if purchasing power.

Myth 2: Your house is the best investment.

Even in a strong real estate market, I would not advise having no other investments other than your house. It's like a stock investor only investing in the stock of his/her own company. You may get lucky bit you will be exposing yourself to unnecessary risks if the cards don't play out to your favor.

If you are young and do not have much saved, you will need to save many years before you can afford a down payment. That's many years where you could hace invested in stocks, bonds, commodities and taken advantage of compound interest.


That's not to say you shouldn't buy a house or invest in real estate in a well-diversified portfolio. (More on that later.)


Myth 3: You can get rich by investing following the news on the Wall Street Journal, CNBC, etc.



No. If it were that easy, we'd all be multimillionaires. Yet many novice investors tend to have this naiive misconception. I've dedicated an entire chapter on this (the Efficient Market Hypothesis.)


Myth 4: Stock prices (or Gold prices, Treasury prices, etc.) are already too high. There's no way I'd put any in my portfolio!


Money managers who felt the NASDAQ was too high in 1999 lost big shorting it. The NASDAQ eventually doubled and peaked in 2000 before dropping below their 1999 levels. Were these managers "right"? Yes, but their timing was off.