There are many myths about stock market , most people believe in these myths and even preach them hence preventing other people interested in the stock market from entering the market and starting trading stocks or investing , today we will discuss and also debunk the top 7 myths that people believe in and also propagate knowingly or unknowingly-
7.Only Brokers make money in stock market
It’s a big myth in the stock market that only the brokers make money in the stock market in form of fees and commissions and the traders or investors pay half their profits to the brokers in forms of these commissions, this might have been true to some extent maybe 10 years ago but the entry of discount brokers has changed the game and now brokers like Zerodha are charging flat 20 Rs for day trades and nil charges for delivery based trades , also brokers like Upstox are opening account for free without asking it’s customers to deposit any upfront amount to open accounts , if you still don’t have a trading account now might be the right time to open your account , click Here to get started.
6.Buy hot stocks or stocks that are in news , they will deliver profit
This is something that people new in the stock market believe in and they just buy the stocks that are in news 24/7 thinking that these stocks will deliver them profit but what happens is exactly the opposite , every trader or investor must stay far far away from such stocks if he or she wants to survive in the stock market , in the recent times examples of indiabulls , DHFL , Yes bank comes in mind when one thinks of stocks that have received more limelight in the media than they actually deserved , if you want to trade news or financial results that must be done with extreme caution and with proper risk management in place , we have explained that in our previous article Here .
5. A good reputed company or blue chip company stock gives good return
This one is a myth that many investors belief and also preach to others , some conservative investors will always tell you to invest in blue chip stocks that is in big and reputed company stocks , if you will look at most of these companies you will find that they are the biggest laggards in the stock market and move too little even in bullish markets but fall like Humpty dumpty in bearish phases , a company might be big and even too big to fail but that doesn’t mean that it’s stock will be the same , look at the examples of PSU giant backed by government of India like SBI which is a behemoth but it’s stock is a laggard compared to stocks of most private banks , also look at ONGC which is a maharatna company and biggest one in it’s sector , now go and look at it’s stock , you will know what i mean , companies having reputation or having government backing doesn’t always translate to a good stock.
4.You don’t need money to make money in stock market
Contrary to what others will tell you , personally i don’t believe in stories of rags to riches in stock market , i don’t believe that anyone with 1000 Rs investment can make it big , most people who enter the stock market even with big capital wind up losing their capital so the stories of Rakesh Junjhunwala entering with 2000 Rs investment are very illusive , these are only one in a Billion miracles , most people require a decent capital to trade or invest in the stock market , so people who say that you can be a millionaire with 1000 rs in your pocket are nothing but day dreamers.
3.A stock has fallen too much and is cheap so BUY NOW !!
You must have heard the self proclaimed experts of the stock markets say that “X stock has fallen too much , now it will start rising so buy it quickly ” , such people don’t even themselves know what they are talking about , stay far far away from these types of people because if a stock has fallen from 100 to 50 that isn’t the signal to buy , that stock can even fall to 5 Rs , you must look at technical charts and fundamentals to determine possible reversals and not buy just because stock is cheap , the biggest example in recent time is the stock of Yes Bank , eveyone know about it’s big plunge , people said to buy at 40 because it’s too cheap ? Really ? The same yes bank fell to Rs 4 , there are still people who are stuck in Yes bank with average price in the range of 40 – 60 Rs just because they thought or heard the stock was too cheap !
2.Stock market trading is easy and is a get rich quick scheme
Most people who enter the stock market think that stock market is a get rich quick scheme and they will double their money in a few days and some even dream of becoming millionaires overnight , do you ever expect to become millionaire overnight in your job as a doctor , engineer or an advocate ? No you won’t because that’s not possible and that is also true for stock market , then there is another group of people who think that learning to trade or investing is too easy and they will become experts in a month or so , did you become a total expert at your profession in a month ? No you can’t because that is impossible similarly you can’t expect to become an expert in stock market in a month , even the seasoned traders and investors having decades of experience learn something new in the stock market daily and hesistate to call themselves experts.
1.Stock market is a casino and traders / investors are gamblers
Most people who fail in the stock market term it as a casino but the reality is far away from these claims , to a person who has studied technical charts or has done fundamental analysis of stocks stock market is not a casino and trading stocks isn’t gambling in the stock market , it’s gambling only when you don’t know what you are doing and buying selling on tips of others without doing any hard work or home work before making trades or investments , we have talked why trading isn’t gambling in our other post thoroughly which you might like , click Here to know more.