Debunking the 5 Biggest Investing Myths
If you’re following this advice, you’re going to miss out.
Today, I want to clear the air and offer you a big picture look at five of the most common investing myths.
I’ve had readers write in about these myths all the time, and there’s only one thing I can say about all of them:
FALSE, FALSE, FALSE, FALSE, FALSE!
It’s easy to get caught up in the most popular topics and “strategies” for investing, but I believe it’s important to know the difference between facts and myths.
Make sure you’re avoiding these five investing myths in today’s video:
This week I am going to do a kind of instructional video. I don’t do too many of these because the YouTube algorithm don’t like it and a lot of people don’t like it because I am about to debunk a number of beliefs people have. I will just get right into it.
Many people have some weird, bizarre notions about investing, speculating, trading — whatever you want to call it. The thing about it is, this is repeated by a lot of people who are often on the internet claiming these things. They can affect you as a result of believing this because you have never heard otherwise.
It can cause you to do the wrong thing at the wrong time in the wrong way. Then you end up missing out and losing out. When you hear this stuff I am about to tell you about, just understand this is bizarro world stuff that no one who has ever invested, traded or speculated for a living would ever agree with.
They would never write this, believe this or put this out there because it’s untrue. Before I say that, I want to make sure you understand this channel and I represent a number of newsletter subscriptions. This is intended for people who have a long-term timeframe.
For our stock services it’s a minimum of one to three years. We are buy and hold. We endure through volatility. We are focusing on, in this current bull market, growth and innovation. If you are very short-term oriented or want day trades, I am the wrong channel for you.
Maybe this stuff is inappropriate for you. However, for the folks who are interested in us and our services, what I am saying is true. Here’s number one.
Is It Super Easy To Make BIG Money?
The number one bizarro thing you will hear people talk about is that it’s super easy to make big money, especially after you go through a period like what we have been through in late 2020 and early 2021, and in the crypto markets at various times.
Part of this is this belief that the way to make big money is to trade and churn your account constantly, looking to buy and sell and go in and out rapidly. Truthfully, this is one of the most destructive things people believe in, in my opinion. You can look at the greatest investors and speculators.
For investors, let’s say Warren Buffett. One of the greatest speculators is named Carl Icahn. You can look them up. They don’t go in and out all the time. George Soros is a bit of a trader, but he’s not buying and selling something he’s making big money in from second to second and minute to minute.
People sometimes mistake the occasional big winner that can happen from time to time as proof it’s going to happen every time. No, folks. The vast majority of even people who are written about who have made hundreds of millions or billions of dollars have done it by having a long-term timeframe.
If you look at what is now a vast compilation of research, it absolutely confirms that human beings — 99 out of 100 — suck a trading. We suck at trading. Most people who are trading actively end up losing all their capital within 12 months, 18 months or two years.
That’s because it’s hard to make that many decisions and get them right. If you are never in anything for very long, you can never make any money. That’s debunk number one.
Are You Going To Make Money All The Time When Investing?
The second one is something I get directed at me in email and sometimes on YouTube and Twitter. People believe that there are a group of people who make money all the time, every single day. And that somehow if you have a subscription to one of my newsletters that this is something you are going to experience.
It’s laughable to me that’s what some people believe. However, they genuinely believe there are some people — maybe hedge funds, investment banks, market makers or Warren Buffett — but I can tell you this, point blank, no one makes money all the time.
No one even makes money every single week, month or year. Every single investor, trader or speculator has bad periods and good periods. This leads into the second thing which is that a lot of people are told the way you should judge somebody in their investing, speculating or trading skill is to go and look at when markets are at their worst.
I can tell you this is bogus. There is no way you are going to determine who has skill in the investment markets by looking at them, let’s say, the worst part of the COVID crash. That’s not going to tell you anything. That’s a moment of extreme liquidity crisis.
Everyone wants to sell. Very few people want to buy. Prices are marked low for pretty much all assets. You are then measuring somebody based on something where there’s a liquidity issue that’s in nobody’s interest to continue, whether it be the COVID crash or anything else.
The reality is the opposite. All great investors endure through bear markets and are buying assets that they want, that they’re looking to buy at low prices at these bear markets, crises, crashes, corrections — whatever you want to call them.
The idea that great investors are buying and selling to optimize for what their account is going to look like in a bear market or at the lows is laughably wrong. This is bizarro belief number two I wanted to debunk.
Do You Make Money By Having Different Strategies?
Number three. Number three is that many people hear, read and believe that to make money you need some weird, out there strategy. The evidence is so clear in front of you. Look at companies like Amazon, Google, Netflix, Facebook, Tesla or even Bitcoin.
These are all widely known, widely discussed. They have made hundreds of percent if not thousands if you were willing to stay in it for long enough.
I can tell you from having been in markets for 25 or 30 years, the big money is made easiest — if you have a long-term timeframe and you are willing to sit through volatility — in well-known stocks. I mentioned a bunch of them. One of the other beliefs related to this is the idea you want to own a low-price stock and accumulate thousands of shares.
I can tell you point blank: Your chances of getting this right are low. You are much more likely to get a great return from owning higher-quality stocks that have higher-priced shares. I personally owned Netflix in under $20 and into the $20s. I owned Google when it came IPO at $85.
It’s unusual to find a high-quality, low-priced stock that’s going to give you a high likelihood and high confidence of making a lot of money. It can happen from time to time, but to exclusively focus on that and think it’s the path to big wealth, I believe, is a bizarro notion.
You are missing out on the vast majority of high-quality opportunities out there. In my judgment, focusing on opportunity, growth, innovation and looking at the market capitalization of a stock. In other words, the stock market value. It’s the number of shares multiplied by the price.
If you can find a company that has a low market capitalization, that is growing quickly, that has massive opportunity in front of it, has innovation that differentiates it, this is the company to own. This is the company to own, irrespective of what its stock price is.
Tesla has never been an under $5 stock. It’s never been a $10. However, it did have massive growth, has massive opportunity in front of it and was very laser-focused on innovation. That should be your focus, rather than looking at some weird strategy.
Or this focus on looking at low-price, but low-quality companies. You put yourself at risk of buying into fraudulent companies, companies where they are looking to boost the price up and you get caught in it. Again, it’s an unpopular opinion. I will probably get trolled for this.
Does The News Have An Effect On The Stock Market?
Nonetheless, this is my experience through life. The fourth one I will say is one I get a lot. People believe that news is what makes stocks rise or fall in a permanent way. People write me all the time and say, “XYZ news is coming out and it’s going to make this stock soar.”
There are a couple problems here. One, if you know that news, so does everybody else. Certainly Wall Street is aware of all this news. They have analysts that are scouting out the company, the sector and industry. They know all of it. If it was so clear, they would have piled in ahead of it.
In all likelihood, they are sellers into that news and not buyers into that news. Remember, what causes gains is a demand and supply imbalance where there is a crush of demand where people are willing to buy sustainably for a long period of time.
News, in my experience, is something that generates temporary gains and volatility and inevitably fades. Buying for news is one of these things that many people will write about because it generates good content to read about. However, investing like that is punitive.
Like I said, you will find that people are actually sellers into that news. If you know it, everyone else knows it as well. It causes this thing that’s talked about called, “buy the rumor, sell the news.” In other words, people anticipate the news and sell into it.
Should You Spend Your Time On Volatility Control?
The fifth one is a powerful one I get trolled on all the time. Many people believe the object of their investing, speculating and trading should be to control volatility and this is what they should spend their time on.
In fact, there is a vast market machinery that is dedicated in the newsletter sphere to trailing stops and other kinds of volatility control that people spend all their time on. The most critical thing they are telling you when they focus on this is to sell when prices are falling the most.
I suppose for those of you who are day trades — I can say unapologetically that we are not day traders. We are not for the short term. We are long-term, buy and hold. We endure through volatility. I suppose for those people controlling volatility is absolutely critical.
We are not for them and this is not for you. However, research shows that the biggest up days actually follow the biggest down days. Many people will have experienced this. Right after you see, you will see that stock or the market continue to go up.
By focusing on volatility, you miss something that I think is critical. It’s obvious that after a bear market ends, a bull market begins. By focusing on volatility, you miss out on the big up days and bull markets that generate massive money by having a mindset of negativity.
It’s the opposite of BOP. It’s to be bearish, pessimistic and negative. Then you end up missing out on the true opportunity to make big money that’s made in a bear market.
Those are my five debunkings of destructive beliefs that I believe are going to cause you to miss out. They are widely out there in the internet and media investing and trading space. I would tell you to stay away from it. Stay clear from it. Be bullish, optimistic, positive. I am very BOP on our stocks.
I would tell you that after a period like we’ve been through for six or seven months, there is usually a lot of pent-up demand. The trends are real, the technology is real and that’s when you make the big money.
I’ll have another video for you next week. Until then, this is Paul saying bye.
Editor, Profits Unlimited
BONUS MYTH: Invest in the old world.
False! You have to invest in the new game-changing innovations of America 2.0!
Here’s one: flying cars.
Yes, flying cars. Like the kind of stuff you’d see on The Jetsons.
I recommended a stock for it in my Secret Portfolio two weeks ago.
This company is bridging the gap between road-bound gas guzzlers to a future of electric vehicles that FLY.
I’ve been investing for more than 25 years. I started my career on Wall Street in 1991 as an assistant portfolio manager at Bankers Trust. I quickly advanced to prominent positions at Deutsche Bank and ING, managing multimillion-dollar accounts. In 2006, the owners of a $6 billion firm named Kinetics Asset Management recruited me to manage their hedge fund.