6 investing myths holding you back

Bryce: [00:00:26] Welcome to Get Started Investing the podcast, where we answer all of your money and investing questions. My name is Bryce and today we're covering the biggest myths about investing. As always, to chat through it, I'm joined by my equity buddy, Ren. How are you? 

Alec: [00:00:44] I'm very good, Bryce, very excited for this episode to hit you right off the bat. The biggest myth in investing is that it isn't fun, and we're proving that investing can be fun with our live event on the 10th of April. That's what a segway is a tie in.

Bryce: [00:01:01] That's right. We, we're very excited that we're going to be back in live format here in Sydney on the 10th of April. Ask An Advisor if you're, only listening to Get Started investing, is a series we do on equity mates where we bring in Australia's best financial advisors. And, put your questions to them. And that's what we're going to be giving you the opportunity to do at this event. So head to equitymates.Com/events to find out more information. We cannot wait. It's going to be awesome. And night of, asking advisors, meeting the team. Plenty of giveaways. Can't wait. So grab your tickets. 

Alec: [00:01:35] So let's get into this episode. This, we're talking about investing myths. And that's really, you know, for people who are just starting, there's a lot of preconceived ideas and myths about investing that really stop you getting started. But for people who are on their investing journey as well, there's a lot of myths that change how people invest or, yeah, just make things sometimes harder than they need be. So, we went to the Equity Minds Facebook discussion group, if people want to join, and we asked about the myths and preconceived notions that they've overcome as investors, and together, we're busting a lot of them. So. 

Bryce: [00:02:16] Myth busted. 

Alec: [00:02:17] Where do we want to start?

Bryce: [00:02:18] Start with number one. The myth that you need lots of money to start investing. You need to be rich. Investing is a game for rich people. 

Alec: [00:02:27] And I think this myth had some truth to it. Maybe 20 years ago, you know, when we started investing, sort of. Well, when I started investing ten years ago, you needed $500. That was sort of the minimum investment size if you go back a generation before that, like when our parents were younger, you probably did need thousands of dollars because you had to go to a full service broker who was a person who took trades over the phone, and you needed a bit of money to make it worth their while and to cover all the costs. That is not the case anymore. 

Bryce: [00:03:01] You can now, as we've said plenty of times in the show, get started with a matter of sense. And, this was echoed in the community ran. This was one of your comments, that you thought you don't need to start with a lot of money to make a lot of money. And, Kara also said that you don't have to be wealthy to start investing. And, I think, yeah, the cost and access has now just become so cheap and readily available that don't let the feeling of needing thousands of dollars to start investing be the hurdle that stops you from starting.

Alec: [00:03:30] Yeah, start. Just start. Oh, yeah. Like just just even if it's just a few cents in a micro investing app or if it's a couple of dollars in a low cost broker, just start. Everything will start making more sense. You you get your head around this world a lot more.

Bryce: [00:03:47] Yes. 

Alec: [00:03:48] Myth number two. 

Bryce: [00:03:49] Myth number two, investing is gambling and too risky. 

Alec: [00:03:53] Now, this is a myth that is born out of, I guess, people's perception of what the stock market is and how you make money in it. And also, I think a lot of pop culture, I think also everyone has a story like a relative or a friend that has lost money in the story. 

Bryce: [00:04:13] Everyone has a squeaky wheel in their life that comes to the stock market. That, that, and what I mean by that is yet, to your point, someone who has a story about losing money in the stock market, but with that one person, there's probably many others in your life that have done well from the stock market that aren't as vocal about it. 

Alec: [00:04:32] Maybe, or like that squeaky wheel. So like, for example, in my family, do you remember HIH? It was before our time, but yeah. My like, there's a family story that I, when HIH collapsed, we had a bunch of, like, our grandparents had some money invested in it and that I reckon coloured a generation of, well, multiple generations of perceptions about the stock market. And everyone's family has those stories and, or has friends with those stories. You know, I grew up in a family where stock market wasn't a thing. Not everyone could have your upbringing. 

Bryce: [00:05:08] Don't get me wrong, though, there are stories in my family and network of people losing lots of money. To your point, at the start of that, you've got to actually understand what the stock market is and understand that you're buying what you're buying into and that you're not just taking a punt. 

Alec: [00:05:22] Yeah. And so you can treat the stock market like gambling if you buy an individual company, if you put all your money on one stock. And you don't do the research and the work on that one stock. You are essentially gambling because you're relying on luck to go your way to make money. But there are plenty of other ways to invest in the stock market, and importantly, plenty of other assets to invest in other than individual stocks. And the one that we always talk about and people are probably sick of hearing about it is the index ETF. Buy a little bit of everything. And it's a very different proposition to loading up on one stock. And when you're buying an index ETF, the idea that you're gambling or the idea that it's risky. It really starts to change. There is obviously still overall market risk, but you're not punting on one stock and one CEO and one company doing well. 

Bryce: [00:06:20] So we had, Aaron, she said that the stock market is just gambling. Simon from the office said investing is too risky. And Clinton said it's difficult, complicated and risky. But the myth busted. Moving on to number three. You don't need to. Sorry. The myth is that you need to be a financial expert to invest. I think this is a great one, we've absolutely busted this one. 

Alec: [00:06:45] I like how you're keeping an internal scorecard where you're saying we're busting everything. 

Bryce: [00:06:50] Here we are. 

Alec: [00:06:50] Is it a. Yeah. Anyway. 

Bryce: [00:06:54] Well, I think you and I are, you and I are a perfect illustration of this myth in that.

Alec: [00:07:00] We're certainly not financial experts. 

Bryce: [00:07:01] Exactly. 

Alec: [00:07:02] Although we also. 

Bryce: [00:07:05] We are not financial experts. And if you want, something that rings with me is, Emma Fisher. When we first interviewed her maybe 3 or 4 years ago on Equity Mates. She is a financial expert and a professional fund manager, and. But I think we asked her, what's a piece of advice that you keep for your younger self or something along those lines? And she said that you don't need a degree to be a to be a good investor. And I mean, that is coming from someone who day in, day out lives and breathes this stuff. 

Alec: [00:07:34] Geohot in our Facebook groups, the myth that, hey, struggled with early in his investing journey was that financial planners have all the knowledge to get you to make the best investment decisions for different risk scenarios. And I think, you know, financial planners and advisors certainly can play a role. But the myth is that that they are ness like that. You need them to even take the first step. You know, you can be a DIY investor and you can start taking those financial steps, start investing, you know, doing whatever else you want to do. And then when you start having a family and you have more complex financial needs, then financial planners can really play more of a role. So I think financial expertise helps, but you don't need it to start.

Bryce: [00:08:23] Yeah. And the whole industry in the past has been set up to make you feel like you need them. You can't do it yourself. So you have to pay experts to do it on your behalf. But that's just absolutely not the case. 

Alec: [00:08:37] Yeah. All right, Bryce. So that's three myths down. Three more. We've got to go. But let's take a quick break and then we'll come back. All right. Welcome back to Get started investing. Today we are on a myth busting crusade. We are taking some of the common misconceptions when it comes to the stock market. The biggest reasons are why people don't start investing and we're busting them. So if you've got a friend or family member in your life who believes one of these myths and isn't investing, this is the episode to send them. So far, we've talked about the idea that you need a lot of money to get started. Yeah, that investing is like gambling, or that it's too risky and that you need to be a financial expert to get started. Bryce, hit me with myth number four. 

Bryce: [00:09:23] Myth number four that we're about to bust is that you have to time the market. No, in fact, you don't want to try and time the market. 

Alec: [00:09:32] Yeah, yeah, no one can. No one can accurately time the market. That is just the reality of investing and the idea that you need to buy at the best times to make money is wrong. Yes, provably, empirically wrong. We wrote a book about it. 

Bryce: [00:09:51] We did write a book about it. I think what's driving this sense Ren when you first start investing is the classic buy low, sell high. Yeah, you've got to buy low and you sell high. That's the strategy. Yeah I don't know who drills it into you actually, but it feels like it's something when people figure out that they want to start investing, they do some research. That's generally the first one of the first things that comes up. Yeah. Buy low, sell high. 

Alec: [00:10:17] I mean like intuitively that makes sense. Yeah. 

Bryce: [00:10:19] So it's just not the case though, because what mentality that then gives you is one that you need to time the market. And to your point there are case studies and strategies that show that that is just not the way to do things. 

Alec: [00:10:31] Yeah. It has this assumption that the stock market is sort of a mean reverting machine where like when it's low, you buy it, when it's high, you sell it, then it goes back down. But like the fact of the matter is it's on a constant trend upwards and many of the best investments that you could have made, you probably wouldn't have had a chance to buy that low. And especially for your core portfolio index ETFs. It's not about buying low and selling high. It's about buying when it's low and buying when it's high. Safe in the knowledge that over time it will continue to trend higher. 

Bryce: [00:11:07] Buy high and buy higher. 

Alec: [00:11:09] Yeah yeah yeah. So much money has been lost or missed out on by people trying to time the market. And this is a classic example of that. You know, on this podcast and on the Equity Mates Investing podcast, we're talking about how all these stock markets are hitting all time highs. Australia did, the US did. Japan has, crypto has. But so many people will have looked at the state of the economy, the cost of living crisis, the housing crisis, the questions around consumer spending and said, this isn't the time I'm going to wait and I'm going to invest later when the time is better. And unfortunately, anyone who did that missed out on the last few months. 

Bryce: [00:11:53] Yeah, you wouldn't need to trust me. You didn't want to miss those.

Alec: [00:11:56] Yeah. And so it's just like this lesson that we've learned over and over again that it is impossible to time the market and therefore you just keep buying. 

Bryce: [00:12:05] It's such a liberating feeling as well. When you finally figure out you don't need to time the market. 

Alec: [00:12:10] It's such a it's seven years of equity mates so we're doing now and it's you look back at a consistent dollar cost averaging approach. And you know in that time we've had highs and we've had some crashes. We had the crash of 2020. We had the crash of 2022. But you just look back and you're like, oh I get it.

Bryce: [00:12:28] I get it. Yeah.

Alec: [00:12:29] And that's why we kind of just keep saying, just get started. Because it may be the whole not time the market just consistently buying makes sense when you've got a track record that you can look back on and you can be like, oh that was pretty good. Yeah. All right. I mean, that's number four. What is number 5, Bryce. 

Bryce: [00:12:47] Fnumber 5. Myth number five is that you need to pick stocks to build wealth. We had Roman comment that you need to buy and sell individual stocks, a well allocated index portfolio where the rebalancing strategy beats most active managers. And then we had Oscar also saying that the myth is picking stocks to beat the market. This is something that we fell into. This was a trap that both you and I when we started, we were trying to pick stocks. Yeah, we thought that was the way that to make money in the stock market and to make a lot of money, you had to individually choose stocks. 

Alec: [00:13:17] Yeah. Yeah. And you just don't, I mean we spoke about index ETFs earlier in this episode. And that is a perfectly good strategy to build all the wealth you will need if you want to. You can also pick fund managers and you can have them manage your money. There are options if you don't want to spend all the time analysing individual stocks. You just don't have to do it. 

Bryce: [00:13:41] You can be. You could become an incredibly wealthy and successful investor without. Needing to choose one single company. 

Alec: [00:13:48] Yes.

Bryce: [00:13:50] Myth Busted. And this is perhaps the biggest myth that we've come across over the last seven years, Ren.

Alec: [00:13:56] It was certainly the biggest myth in the Facebook discussion group threat, which surprised me, because. 

Bryce: [00:14:02] The myth is that you need to trust a fund manager. We have had Henry say that investing in fund managers is a good idea because they do this for a living. That's the myth. And then hate that you can't beat fund managers funds that track the index because they're scared the index will bait them. And he goes on to say that, you don't need to be trusting in fund managers because most of them can't be in the market themselves.

Alec: [00:14:25] Yeah. Well, I think yeah, his point is that there's a lot of, professional incentives to act in certain ways that undermine overall performance. I think this really ties back to what we were speaking about earlier with the financial advisors. It's like they can play a role, but the idea that you need to just blindly trust them and that you can't do it yourself is the myth. That everything that they are doing, you know, they might be doing it better and they might be spending their days studying market. So like there's no reason that you wouldn't outsource it to them, but you don't have to outsource. Told you you can do it yourself. You can study markets yourself. You can choose individual stocks yourself. It is all within your control. As you said earlier, Emma Fisher from LA, speaking about how you don't need a university degree to become a good investor, you just need to spend the time doing it. And if you don't want to spend the time doing it, you can outsource it to a fund or an index. 

Bryce: [00:15:21] Yeah, yeah. So six myths that we've busted. If there are, I'm sure there are some in there that you might be feeling yourself for. If you have no family or friends, that is, stuck on one of them, then send them in this episode, because there is no reason that you shouldn't be starting your investing journey. If, if you're facing one of these, or struggling to get past one of these myths. So, we have written a book about it as well. Don't stress, just invest. Which will really help you through this as well. 

Alec: [00:15:50] Yeah. And, well, if you have a question that you want to ask, and if you have another myth that you're trying to get over the place to work, throw it at our live Ask an Advisor event. The link is in the show notes. We can't wait to see you there. So come, join us on the 10th of April. 

Bryce: [00:16:06] Yes. Can't wait, see you there.