Comments on: 5 Common Misconceptions About Investing

By: M

Wed, 25 Feb 2015 23:29:31 +0000

that’s a fantastic idea… i often think of that for myself, but never think about explaining it like that to others… d’oh

thanks Steve

By: Steve

Steve — Wed, 25 Feb 2015 21:31:01 +0000

You should try rephrasing to your friends as “owning a business”. You could ask if they would like to own McDonalds as a whole, in an abstract sense, if they saw the profits and felt it was a satisfactory return. If they are, they can own it in a fractional sense. Make them think about the products. Diageo is a great example – put a pint of Guinness in their hand and ask them if they would like to make money every time someone in the world orders a pint.

By: M

Wed, 25 Feb 2015 09:43:45 +0000

Thanks Viviane – if you could link the article back to me with a credit, then you can certainly re-post

Cheers

By: Vivianne

Vivianne — Wed, 25 Feb 2015 05:59:24 +0000

Wow, I like the article a lot. Can I get your permission to repost?

By: M

Tue, 24 Feb 2015 18:15:26 +0000

I think you’re right… ‘the millionaire next door’ is the guy who drives a 17 year old estate (stationwagon)

Thanks for your thoughts, always appreciate them.

By: Dividend Life

Dividend Life — Tue, 24 Feb 2015 00:43:03 +0000

Hi M,

I enjoyed your article. I think popular culture is another reason investing is ‘gambling’, ‘risky’, ‘for the rich’ etc. When it comes to options and derivative trading, investing really is gambling. People likely associate the stock market with stories about Barings Bank or JPM’s London Whale etc. And those stories grab the headlines much more than the millionaire next door.

I’ll go out on a limb and say that the common stereotype of an investor is likely not a person driving an average car in an average home with a portfolio of index funds.

So there’s certainly a need for (re) education – I grew up thinking investing was for wealthy people, and it wasn’t until 2012 that I bought my first shares.

It’s almost a moot point if the market is random or not…the fact is, that it’s unpredictable which largely amounts to the same thing. Diversifying as you mention is key – people figured this out way back when with “don’t put all your eggs in one basket” but it seems, in the search for quick riches, many forget what our forebears have learned.

Best wishes,
-DL

By: M

Mon, 23 Feb 2015 21:34:19 +0000

You’re right – day trading is a major risky deal! But how do we best inform people that proper investing isn’t scary and dangerous?

By: Tawcan

Tawcan — Mon, 23 Feb 2015 19:48:00 +0000

Great article, there are so many misconceptions when it comes to investing. A lot of people think investing is risky and it’s like gambling, but really it’s not. Investing is only risky if you’re doing day trades.

By: M

Mon, 23 Feb 2015 16:01:12 +0000

Good points about gambling. I think the length of time is the crucial thing here really. When you invest, especially in dividend-paying shares, it’s about long-term growth or receipt of growing income. It’s not about short-term gains.

There is definitely some skill involved in poker, although unlike in buying stocks, you do not get to choose your hand in advance. You have to play your hand as best as you can and constantly monitor every other player… and maybe also count cards

I’m not expert, but I’m not monkey either. There are plenty of random facts about stockpicking and fund returns and the like, it often seems quite random, but I don’t think it is really. If you invest in high quality, well-run, dividend-paying businesses you will probably do well for yourself.

By: weenie

weenie — Mon, 23 Feb 2015 14:12:12 +0000

Lucky you getting to talk about investing every day! I only get to ‘talk’ about investing amongst the blogging community!

However, with regards to point 1, I’d say that gambling is similar to investing because in theory, you CAN potentially get your money back, even with something like the lottery. Just that the odds are slim but still possible.

The main difference is that when you invest, you own something, be that units or shares. When you place a bet, you own nothing.

Also, investments are generally long-term and the longer you leave them, the more chance there is for you to increase your returns as time goes by. Gambling/betting is almost always short term, instantaneous in many cases.

I’d also say that gambling isn’t only about chance – I’d have thought that successful poker players actually have skill so they keep winning?

As for investing and chance – how about those famous monkeys picking stocks by throwing darts and doing better than stocks picked by experts?

But yes, essentially, I agree with what you’re saying – by and large, the risk is different and investment risk isn’t one that people should be afraid of.