If you invest in the stock market (or are thinking of getting back in the market), be sure you are basing your investment decisions on sound logic and reasoning. In particular, don’t automatically accept certain “facts” about stock market investing that are more mythical than true.
Myth No. 1. “This is a good time to invest in the stock market.”
Most people who are in the business of selling investments will say this. Sometimes they actually believe it. Other times they just want to boost your confidence so that you will buy something. The truth is that for some people and/or under some market conditions, it is never a good time to invest in the stock market.
Myth No. 2: “Stocks on average make you about 10% a year.”
This statement is probably the most dangerous myth of all. Even today you will hear gurus like Dave Ramsey repeat this. Stocks on average will not make you 10% per year (or any % per year) if you buy at the “wrong” time, such as between 2000 and 2007. This “average” number is based on a time period that that extends back before any of us were born. What good is that? Forget averages. Focus on risk management.
Myth No. 10: “Stocks outperform over the long term.”
What does this mean exactly? Outperform what? What is “long term?”
A baby boomer looking retirement in the face may not have the “long term” necessary to realize this alleged “outperformance.” We don’t need “outperformance” anyway. I would be happy with “some” performance, perhaps 1-2% over the inflation rate.
You should read and think about all of the stock market myths (link below), then make informed decisions about what to do next.