5 common investing myths

There are many myths surrounding investing. Below are 5  of the most common ones we encounter at G3:

“Picking hot stocks and… timing the markets is the best way to achieve the best long-term returns”

This is the wrong approach and ultimately would have investors chasing returns that have already been realised by the markets, in many cases. Nobody has a crystal ball to read the future so portfolios built on predictions are not best placed to achieve superior results in the long term.

“You need to have a pot of money to invest before you can get started”

-The right time to start investing is now. The younger you start the better your expected outcome. A rough guideline is that 10% of your net income should be invested throughout your working life to ensure you have the same standard of living in retirement that you enjoy now.

“Your money is safest in bank deposits”

-Holding money in cash to cover emergencies and for short term spending needs like holidays and vehicle purchases is very sensible. Investing all your surplus funds in cash long term is reckless. Cash rates don’t always exceed inflation, after tax, and you do not achieve the growth you need over the long term. Think about this-$100 today will not buy the same as $100 in 10 years time. Potentially by being too conservative you can reduce your retirement pot by hundreds of thousands of dollars.

“Shares are risky and I am safer in property”

–In NZ we have a passion for bricks and mortar which is built into our psyche. The reality is if you invest in a “structured” share portfolio, allocated according to your appetite to risk and from surplus income, you are exposing yourself to less risk. Why is this? Generally the purchase of property will involve large amounts of debt. This debt and your ability to repay adds significant risk. You are also only invested  in one or two properties in one country, as opposed to holding shares in many companies and many countries. Diversification is the only free lunch you get with investing.

“I don’t need an adviser. I am better off investing by myself to save money”

– There are very few people who have the required education and research available to them to be able to manage this themselves. Investing sensibly also requires structure and discipline which we tend to lack unless we are taking professional advice. If it was that easy we have all at G3, just wasted the last 13 years studying the subject!