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Millennial Money: Debunking five common investment myths

Group of people having questions.
Debunking some common investing myths. (PHOTO: Getty Creative) (metamorworks via Getty Images)

SINGAPORE — With so much information available on the Internet, it is hard to discern what is true and what is not. And it’s even harder when it comes to matters regarding one’s finances and wealth.

Many people often fall prey to common misconceptions, and pass on secondhand knowledge that may confuse new investors or discourage them from investing at all.

This is part of a series where Yahoo Finance Singapore will share about the whys and hows of investing. In this sixth part, we speak to several financial experts who debunk certain investment myths and clarify the truth on some common misconceptions.


MYTH #1: “I cannot earn a million dollars within a year from investing”

We’ve all watched films where people become millionaires overnight, but realistically, is it even possible to earn a million dollars within a year from investing?

Most financial experts seem to think that it is possible, although it is unrealistic and dependent on many factors. For example, the primary amount invested plays a big part in how much returns you’ll get. If you start investing with a higher amount, your capacity to earn more quickly naturally multiples.

“With a large enough principal amount, even a modest return could generate a large sum of money,” explained Gregory Van, 30, founding partner of Endowus, a Singapore-based financial technology company.

However he added a caveat: “The focus should be on the risk you’re willing to take to achieve your goals using the funds you have.”

MYTH #2: “The stock market is too scary and unpredictable”

Another common misconception that young adults have towards investing is that the stock market is too scary and unpredictable.

“The media has definitely negatively shaped the way we perceive investing and I rather stay on the safe side by just putting my hard-earned money in the bank, instead of risking losing it all,” said data analyst Samuel Tan, 28.

However, financial experts like Van, say that investing is only as scary and unpredictable as you want it to be. He added that all forms of investing involve risks.

“The stock market is only scary if investors do not take the time to understand how the stock market functions, as well as keeping themselves updated on the market movements,” added Eng Thiam Choon, CEO of Tiger Brokers Singapore.

MYTH #3: “I will end up losing more money than what I invested”

Similarly, the media has portrayed investments as something that one should be cautious of. What if we end up losing more than what we invested?

While we should definitely be cautious, Eng from Tiger Brokers is of the view that investors might only lose more than what they invested if they do not monitor the market movements well enough.

“I always remind investors to do their due diligence and research when endeavouring in stocks and shares to prevent these from happening,” said Eng.

Echoing a similar view, Van said: “As long as you are not using complex, unsuitable methods like margin investing, the most you can possibly lose is what you initially invest”.

MYTH #4: “I need a financial advisor to help me in my investments”

Since investing can be complex, having a financial advisor does make things a lot easier.

“Financial advisors help to check and ensure that your investment decisions are strong,” said Eng, but added that it is not a necessity to have one as decisions should be self-made after all.

“Investors should take charge of their own investments and monitoring since information, news and research on investing and companies are readily available in our current age,” Eng said.

Likewise, Asheesh Chanda, CEO of Kristal.AI, a digital-first private wealth platform in Singapore, added: “Investors need to do their own research to be able to fully grasp what is happening and have their own informed opinion.”

MYTH #5: “Investing is only for rich working adults”

Young people often worry about whether they can even invest if they are not yet a rich working adult, to which financial experts have claimed to be one of the biggest misconceptions and ‘definitely untrue’.

Regardless of whether you are a youth or rich working adult, Eng recommends that investors should have a working understanding of the stock market and be comfortable with long term investing.

For example, if investors want to invest in specific sectors they should look at Exchange Traded Funds (ETFs) instead of buying the shares of specific companies, said Eng.

“Anyone regardless of age can invest, but those who reap the biggest rewards from it will be those who are consistent and work hardest at it to build their knowledge and engage with the market,” said Chanda.

Related stories:

Millennial Money: Common financial terms aspiring investors should know

Millennial Money: Should I engage a financial advisor?

Millennial Money: How to invest? What do I even invest in?

Millennial Money: Why should young people invest?

Millennial Money: What does investing mean to you?