Despite the recent market rally, we have an article Expansion where to be shelled apparent ten myths of the stock market.
both short and long term have been exposed. Nobody can predict the future and therefore need to work on knowledge of past and present and get rid of any myth.
These are tips that we will have probably heard before and that the very article in question and answer but I would give my own opinion about them (in some cases to point out something and in others because I do not agree .) Anyway that is very interested in these and more myths can see the book 100 errors to invest in stock . Very useful on fallacies.
1. It is a good time to invest in stock.
Could ask the same thing to a commercial a housing on the floors? They always say yes. Although it is a widespread myth, if the consultant is not your broker does not have to advise well (note the other banks because they are interested in them because they are also your broker). Now, in my opinion, I think it's a good time because prices are low but for anyone to feel cheated can begin to study some market analysis and decide for yourself. Yours is the ultimate decision and responsibility.
2. Rent shares on average 10% per year.
is a historical fact made since 1800. Century data XIX are not very rigorous and the view from the twentieth century is much more complex. Experts now suggest that a more realistic encrypt profitability by 5%. Everything depends on the "time of entry " in the stock market. If you do not tell that to Warren Buffet with a 23% annual returns or Ram Bhavnani on whether it was a good time to enter the People (I think the latter would say no.)
3. "The forecasts of our economists are ..."
Most will give an ambiguous answer, may itself may not. Is because it is the only truth. But if, as I said before your adviser is also your broker, at times bears say that the market will rise and full bubble will tell ... Never held down! I like this phrase: " Warren Buffett once said that predicting the behavior of markets make fortune tellers look good ." No comment.
4. Investing in the stock market allows you to participate in the growth of the economy.
bag and the real economy have many points of interaction (it is to say that one is the predecessor of the other) but we must recognize that, although most of the time may be so (or statistical ) there are also clear gap in flagrant cases. Let's be serious, are markets that everyone is going to air because stocks behave more like a commodity and is governed by the rules of the market (rise and fall according to supply and demand for paper and the "health" of economic buyers and businesses) instead on the real economy, other factors such as unemployment, production, etc. Can interact but not law, although some politicians do not hesitate to set an example to the bag for claiming to see "green shoots ."
5. For more profitability should assume more risk.
This fallacy is widespread by the "experts" especially for the "democratization" of financial products highly volatile and difficult to understand or control on the part of investors. Options, futures and warrants (each item is similar and, in turn, different) are known to produce large returns on time in case it has the good sense to find the appropriate value in the most unexpected moment. It is often trying to find the winning horse. These products have been widely used by professionals to "cover" of possible descents / price spikes. Sold as mainstream products investor Warren Buffet would be coined by someone with a 23% return Annual investment in stocks and bonds (that is passe say about the parameters of the economy have changed say others), as true "weapons of mass destruction." Words fail.
6. "The stock is cheap right now. The PER is only 13 times. "
The PER is a ratio universalized, Endian and, in turn, misunderstood. Same PER, by itself, can mean either that the company is extremely expensive or future prospects of magnificent. It all depends on how you look. However, when compared with the same companies in their sector and their average the last 5 years then the thing changes and becomes an indicator, in my view, very reliable.
7. Can not be done "timing" the market.
comes into play here the famous theory of contrary opinion in an attempt to anticipate the timing (because it happened is pure luck, you look at it). If the news is tremendous buy and sell if they are very flattering. It is a theory that works well on paper but tends to sell or buy too soon or too soon. Is that a good theory. And I think that yes, this myth is confirmed as principle, the only myth that self-fulfilling.
8. "We recommend a diversified portfolio of investment funds."
All the great investors have a diversified portfolio of stocks, bonds, liquid, etc. I remember one thing: " they can because they have money to do ." At the same time reviewing the biographies of the major investors (Warren Buffet, Carlos Slim, Ram Bhavnani, JP Morgan, Soros, Ben Graham, etc.) All, almost without exception, came to what is to concentrate efforts on a few actions in the end, were "great" investments. That makes one wonder.
9. "This is a market for stock selection
Rather than selecting values \u200b\u200bfor the stock market is a market selection of moments and we can invest in shares of" lower quality "which then result in a boom or invest in stocks of "high quality" and find a crack . When I say quality I mean, of course, companies that underlie the action. It all depends on what time we meet, hence the importance of PER or other type indicators indicating the overbought or oversold them. You can not do with market timing.
10. "Stocks perform better in the long term."
Here I agree with what John Maynard Keynes said: "In the long term, all dead." But it is also true that we must leave a reprieve for the market to advance and recede. The volatility of these years is an example of how you can raise and lower the bag at the most unexpected but ultimately, do not know when it is true, tend to equilibrium.
advise reading the Intelligent Investor Ben Graham (where explains his famous principle of the safety margin) and put it into practice. Be amazed at the results and so much myth leave aside useless.
Greetings.
