5 lies you've been told about investing

There are many lies people have been told about investing. Some of these lies are self-thought. People have been lied to because the person telling this lie doesn't know any better or they failed themselves and don't want to see you fail.

Other people have succeeded and don't want to see you accomplish your goals. So right now, we'll debunk 5 lies you've been told about investing.

Number one: you need to be a millionaire or have a lot of money to start investing

This is not true at all in this day and age. Yes, in the past the stock markets were only for the rich and wealthy, but the doors have been opened to us common folks a long time ago.

With the help of the internet investing the stock market is a lot more accessible now. You can buy and sell shares from the comfort of your living room or bedroom. Discount brokers have also made it very affordable to buy and sell shares. 

Previously, you would have to pay hundreds of dollars just to buy or sell stocks. Now your commission fee can be as low as $4.99 or even free if you're using an app like Robinhood.

You also don't need thousands of dollars to buy shares. You can start off by just buying one share in a company like Coca-Cola, which has a share price of $46 right now.

It's also better to start with a little bit of money compared to investing $1 million from the get-go. Reason for this is that with small amounts of money you can experiment and have fun while you're learning the ins and outs of the market.

Imagine your first time investing with $1 million; you would probably be too scared or cautious with the money hoping not to lose a single penny in the market.

Number 2: I don't have enough or make enough money to start investing

Now, this one is a follow-up from the last lie. Any small amount of money you can set aside will help, even if it's only $10 a week. These 10 dollars add up to $520 by the end of the year and you can definitely start investing with $520. Start saving for investing now and your future self will thank you.

Look at where you could save a couple of dollars during the week. It might mean eating out less during the week or one less trip to Starbucks a week. That is if you like Starbucks of course.

A change of mindset will do wonders. Instead of saying I don't have $10 to spare, change it to how can I save $10 a week? You will kick your subconscious into high gear and before you know it you'll end up saving even more than just $10 a week.

Number 3: invest now because long-term the market has always seen a 7% return

Number three is a tricky one. You will hear financial advisors and even people in the media saying this one. The reason you have to be careful with this one is because the future is unpredictable.

No one can predict what the market will do or return in a given year. If the market went up 10% last year that does not mean that it will go up another 10% in the future. On the flip side, however, staying on the sidelines, because you don't know what the market will do is risky in itself.

People usually talk about the long-term returns to ease your mind and get you into investing. If you stay on the sideline not only will your money not grow, it’s actually losing its buying power, because of yearly inflation.

Number four, I don't invest because the stock market is too risky

This one follows up nicely with lie number 3. Yes, if you don't have at least some basic knowledge about investing then it will be too risky, but with the help of financial planners and advisors there's no need to be scared. 

Also, many investors do at least some self-education by reading investing books and listening to some audio books.

Keep in mind that there is risk involved with anything you do. If you don't want to invest and rather keep the money under your mattress, you are opening yourself up to burglars, house fires or even your dog that might end up eating or shredding your money.

If you think that leaving your money in the bank or your savings account is the way to go, think again. With the measly 1% or less in interest that you earn, your money's buying power is being eaten away by inflation.

If on average inflation is 3% per year, $1 today is worth 3% less next year, so $0.97.

Number 5, You need to be an expert to start investing

It is true that you need to have some basic knowledge about how the stock market works, but you don't need to be Warren Buffett in order to get started. Get yourself educated by reading books (this one is a great start).

Once you have built up your confidence, you can start by investing a small amount of money. Money you would not mind losing. By investing a little amount, you psychologically prepare yourself for growth, because once you see your investments growing it will build up your confidence and knowledge to invest more, in a responsible manner of course.

I hope I've been able to motivate you by debunking some of the most common lies that I often hear being told to eager investors.

What is the stock market

The stock market is like any other market where buyers and sellers come together to trade in goods or services.

Think about the car market. You're the buyer who is interested in buying a new red car. You will head over to the car dealership where you are met by eager salesmen. They show you the latest car models and after some back-and-forth, they convince you to put down some money in exchange for a new car.

The stock market or stock exchange works the same way, but instead of the car being the product its shares of stock.The two most well-known stock exchanges in North America are the New York Stock Exchange and the NASDAQ. It's on these stock markets that you can buy shares in companies like Snapchat, Apple and Starbucks.

One of the main difference between the New York Stock Exchange and the NASDAQ is that the New York Stock Exchange offers traditional trading and the NASDAQ is totally electronic.

Traditional trading is face-to-face trading where buyers and sellers of stocks are on the trading floor executing orders. On the NASDAQ all orders happen electronically through computers and telephones.

Many small and up-and-coming companies can be traded over the counter or OTC. This is where investors can buy and sell penny stocks.

In the past the stock markets were only available to the rich and wealthy among us. But ever since the doors were open to the common folk it has been one of the main vehicles in producing wealth.

There have been many times in history where the market crashed and people ended up losing all or most of their money. A stock market crash strikes fear in the hearts of many stockholders, because many shareholders have their retirement and wealth invested in the stock market.

Why does the market go up and down and crash every couple of years? For an explanation we have to look at both the short-term and long-term. Short-term market fluctuations could be triggered by anything, like shareholder speculation, bad news about a sector, changes in governmental policies, companies meeting or exceeding their projected goals, and the list goes on.

I remember back in 2006 or 2007 there was a popular fast food restaurant in New York that was forced to shut down, because the place had a rat infestation problem.

Even after it was closed, you could see the giant New York City rats run back and forth inside the restaurant.

Bad news like this made shareholders freak out and the company saw a decline in their share price.

After some time passed, the price of the stock climbed back up. You probably know which restaurant I'm talking about, but if you don't just do a quick search online, better yet use Youtube.

Fluctuations in the stock market are influenced by the market cycle we are in. During times of prosperity the stock market is in a bull market meaning an upward trend.

In times of economic hardship and uncertainty the stock market tends to be in a bear market, which is a downward trend.

Besides buying stocks you can also buy mutual funds, bonds, futures, options, commodities, index funds and ETFs on the market.

Companies on the stock market are all publicly traded companies. This means that these companies need to be transparent with their shareholders about their business activities. They also need to present quarterly reports called 10Qs and yearly reports called the 10Ks along with an annual report.

In order to get listed on the stock exchange a private company on the primary market goes public through an initial public offering allowing its shares to be bought and sold on the secondary market, which is the market regular investors like you and me have access to.

A company only makes money during the IPO, by selling its shares to the public. It's then in the hands of the shareholders who can trade with each other.

Of course, a company keeps being the owner of a majority of their shares and they can buy back shares if it makes financial or business sense.

With all the different risks involved in the stock market many people still invest in it, because long-term it has proven to be a great wealth builder.