This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
A quick Google search will relay many myths about investing, but when you understand fact from fiction, you can make wiser, more calculated decisions.READ THE ARTICLE
Some of the most noteworthy myths you should be aware of are as follows:
📌 The stock market always goes up: Stocks sell based on the price/earnings (PE) ratio. As such, “If the PE stays constant, when earnings increase, stock prices increase. Rising prices year over year requires continuous growth in earnings. If earnings decline, stock prices go down.”
📌 Money put into savings accounts is guaranteed: This pertains to banks outside of the U.S., who are not guaranteed by the FDIC.
📌 Dividends are a little bonus that do not need to be reinvested: You have likely heard of the compounding effect, and here is a prime example: “Since 1945, dividend reinvestment contributed 33 percent of the overall return of the S&P 500 index.”
📌 You can’t lose money if you buy a product sold by a bank: Savings vehicles and investments are sold by two separate organizations; As such, you should approach them differently.
📌 Market timing works: It’s impossible to consistently time the market because you will inevitably miss the best days. Missing even ten can make a dramatic difference.
Cut through the media noise: It’s easy to make assumptions, believe the hearsay and trust the rumors, but reality is often different.