For many, stock markets are a place where it is possible to profitably buy shares that have fallen in price, although such a decision is in itself controversial. Despite the high risks and the associated large financial losses, many of our compatriots continue to “play” under the influence of depreciating stocks.
However, the absence of any experience, and the simplest knowledge in this area, make many people contact management companies, this option can be considered the most profitable for those who have just started to get acquainted with the market and its rules. However, there are enough private investors ready to buy shares directly, despite the lack of experience and knowledge.
Investing is so easy, but it’s much more difficult to learn how to assess the risks involved. Such an unenviable state of affairs is facilitated by myths about the stock market, generated by the popular rumor. We should discuss them in order to warn gamblers from hasty decisions with serious consequences.
The game on the stock exchange is just an occupation.
This myth is as comprehensive as it is common. The most surprising is that this is the truth. After all, today you can play on the stock exchange with the help of the Internet without ever leaving your house! In addition to the computer and access to the network, only a special program is required. But only here the meaning of all trade is not a game at all, but earnings. In the market there are dealing organizations and brokers, which for the purpose of attracting new customers substitute these concepts. Free seminars, consultations are held, an advertising company is organized, which allows customers to put on “rose-colored glasses”. Trusting newcomers diligently tell how much you can win, while the more weighty risks of losing are hushed up. But earnings in the stock market are quite a difficult task, it will be more difficult to cook fried eggs. If the player does not have serious knowledge and skills in this environment, then the chances of losing the invested funds are several times more than winning anything. The exchange is not the place where they distribute a freebie. Here in the price of weighted investment decisions.
Investing in stocks – a kind of gambling.
This myth forms with the previous bundle, generating an opinion about passion, akin to what is present in the casino. And this statement is also partly true. Those investors who have just come to the stock market and, without knowledge, make decisions, relying only on luck, can really guarantee the presence of thrills. But can such people be generally called investors? It’s more like players who do not differ, in fact, from their casino colleagues. It’s hard to deny that ingenious game systems generate lucky ones who leave the casino with a fortune. But the absolute majority, when making bets, pursue other goals – entertainment or just rest. It is for this that payment from your own pocket occurs. But the stock market is not such an exception. Here you can play, and you can earn, it all depends on the relationship. But we must understand that the person who is going to make money, but who is not aware of the basic mechanisms of the market, is the same player. And the receipt of income will last exactly until the moment when the volatile fortune does not turn in the opposite direction.
To know how to successfully trade a lot is not necessary, enough and the basics.
If you think that investment is a kind of gambling, it is logical to conclude that for her and know a lot – there is no need. But in case there is only a general understanding of processes, investing really becomes a kind of lottery or a roulette. Uninitiated may seem that the movement in the market does not correspond to any specific logic. In fact, practically everything on the market is interconnected, and those factors that influence the individual issuer certainly have an impact on the price of its shares. In order to fully understand all the interrelations of the market, one must constantly stay in the learning process.Initially, it is worth paying attention to seminars or studying specialized literature, and only then continue to comprehend the basics on the basis of personal experience. Trying to make money in the stock market without learning a few relevant textbooks is akin to driving without knowing the rules of the road. At the same time, the opportunity to become an experienced player in the market does not at all depend only on the number of books read, it is important in practice to be able to apply the information and lessons learned, while drawing conclusions from the inevitable, alas, errors.
Profit in the stock markets reaches hundreds of percent.
Investors, armed with knowledge, come to the stock markets in the hope of increasing their bank account, if not hundreds, so dozens of times. However, such a statement is just a myth, it is impossible to earn hundreds of per cent of the profits here. Do not rely on the experience of the 1990’s – 2000’s, when Russian investors did receive three-digit income figures. It is worth admitting that at that time the growth of the Russian stock market was an exception, albeit pleasant. For the phenomenal growth has to pay, which is observed today. However, even now anomalously high profitability is possible at the level of hundreds of percent, such indicators can be reached even in a falling market. However, do not forget about the attendant risks that make it possible to lose, if not all of the capital, then a significant part of it.
Serious income is possible only through speculative operations.
In the market it is really possible to find people who make 1-2 thousand percent per annum. This is the real earnings of an intraday trader, or a speculator, specializing in day-to-day fluctuations. Stock slang dubbed such people scalpers. Phenomenal interest is not so difficult to obtain. For example, for the day the shares rose in price by 5%, but on an annual basis this gives as much as 1825%. Only that’s where the guarantees that tomorrow there will not be such a phenomenal loss? Experienced speculators as a result of the year earn no more than 100%, but most of the intraday traders are losing or content with crumbs. But their sad fate did not prevent this myth of the emergence of income from being born through speculation. But only it is worth remembering that the hobby of speculation for a novice trader can be disastrous. With the increase in the number of transactions, the number of decisions taken is also increasing. But for a novice speculator in such a multitude of decisions, the infidels will inevitably also, which will lead to a rapid loss of funds on the account. Not good theoretical training will also be saved. People are so addicted to trade, that there is almost no time left for knowing the mistakes and analyzing them. In addition, high trading volumes entail large commissions to the trader. As a result, for the most active traders, oddly enough, “going into a plus” means just committing a commission. All these factors result in the inevitable – the beginner loses his money. It should also be taken into account that those wishing to engage in intraday trading will inevitably abandon their usual work – it is unlikely to successfully combine these two classes. After all, the market for the movement of quotations is so sharp and swift that it requires constant attention of those who want to make money on fluctuations. Speculators observe changes in the market during the entire trading session, which coincides with the usual working day. Often unsuccessful speculations by a newcomer are explained by nothing more than excessive self-confidence. Couples of successful transactions are enough to feel their own genius. The payment for this is large losses. On the other hand, there are those market participants who are demoralized by the failed setbacks. They just do not have enough self-confidence to achieve the result.
Movement of quotations are subject to the market guru.
Among new investors there is a myth and market gurus. Allegedly, these market participants can anticipate stock quotes. However, in its purest form, it is still a Western myth.Due to his youth, the guru has not yet appeared on the Russian stock market. However, this fact does not prevent some participants from creating a kind of stock idol from an analyst, wholly relying on their investment decisions on his advice. And it’s not even that some analysts know the truth, because no one can accurately predict what will happen to the market tomorrow, but that some investors simply need a leader who will lead them with them when making decisions. The famous author of books about the stock market, Alexander Elder, along with the traditional already “bulls” and “bears” singled out a separate group of investors, calling it “sheep.” Their remarkable difference is that they are not capable of independently making investment decisions. To do this they need a kind of leader or “shepherd” who, with the help of his authority, would deprive them of the tedious necessity of constant choice. In fact, the main task of analysts is not to help someone with a choice, but to provide additional information for reflection. This is just the case when two heads are better than one. So to the forecasts of these specialists should be resorted only as a supplementary opinion, which can correct the personal perception of the prospects of the market, but in no way be decisive in making a decision.
Let us cite a curious fact.
In America, an experiment has been conducted for several years. In the course of it, about ten of the best managers of Wall Street and a dozen of monkeys gather, who are great at playing darts. Managers with the help of their knowledge, analysis of the market form a portfolio of shares. And the monkeys are preparing a similar result by throwing darts into the circle of darts, in various sectors of which the names of companies are indicated. The result of the competition is pretty cognitive – for several years the monkeys have won.
A professional will always be able to earn more than an amateur.
This myth is the product of the previous one, the guru. According to this statement, a professional asset manager, for example, a unit fund, will always earn more than any, even a skilful, private investor. In fact, this is not true. A private investor has every chance to surpass the result of managers of large mutual funds, if he follows all the rules of his successful strategy. It should also be remembered that institutional investors bear the burden of various legislative restrictions that often affect the quality of decision making and management. So, a unit fund can not be in money for longer than a certain time, even if at this time the market behaves unstably or even falls. So in this aspect, the advantage is obvious to the private investor. Another point is that large funds buy and sell very large amounts of shares, which significantly affects the cost of execution of orders. If there is a need to make a small transaction for several thousand rubles, then most likely there will be a counterparty at a bargain price. But during the acquisition of shares by the fund by millions of rubles, the deal is delayed for several days, which can cause deviations from the original value. Yes, and to react to unit funds on the changes occurring on the market is much more complicated, the efficiency is lost.
If the shares have fallen in price, then we must wait a little – they will soon rise.
To destroy the previous myth, a private investor should make his decisions not on the basis of naive arguments, but guided solely by reason. The myth of the inevitable growth of the fallen shares is a sample of characteristic and dangerous conjectures. You can justify this myth with various stories and arguments, but for an amateur investor there is nothing worse than making a “successful” transaction when the price of shares is near the historical minimum. One brokerage proverb even says: “Anyone who tries to catch a falling knife can only get hurt.” Suppose you conduct an analysis of the shares of two companies, wishing to acquire them.Shares of enterprise “A” reached a historic high of $ 50 a year ago, now they are worth 10. But shares of company “B” have grown from $ 5 to $ 10 for the same time. What should I buy? Most investors will choose those shares, whose price so rapidly fell, as they entrust that the cost will soon rise. But you should know that the acquisition of shares only because there is a belief in the speedy return of prices – the way to nowhere. The main objective of the investor is the acquisition of shares at a reasonable price. If in doubt, look at the schedule of the fall in the shares of Yukos or American mortgage agencies Fannie Mae and Freddie Mac. Just think how much money you could lose by buying shares of such companies only because their quotes reached new lower limits.
Increased shares will sooner or later fall in price.
This myth is the antipode of the previous one. According to him, those shares that go up, soon must inevitably fall in price. But the stock market should not follow the laws of physics. This is where the stone thrown up falls, according to the forces of gravity, but the situation with the shares is different. If the situation is normal, it is not affected by the crisis or the inflation of the stock bubble, then the shares are influenced by other forces, market forces. They pay attention to how successful the company is in business. If it goes well, the managers have a reasonable policy, then there is no reason for the fall in stock prices down. Of course, as a result, all shares will sooner or later be adjusted. But we must ask ourselves – is the current downward movement a recoil before the continuation of the uptrend, or is it the beginning of bankruptcy? In this situation, the decision made by the investor depends entirely on his knowledge and experience. They allow you to earn money in the stock market, protecting the market participants from the influence of its myths.