Investing in stocks is not a complicated business, You even don't have to know anything or don't have to graduate from any school to invest. If you have money, you know brokers who graduated from schools or courses for you (now just you need a Online-Broker programs and computer anyway), yes you are ready for investing.
Because of you don't have to be professional, there is a lot of myths about stock market. People can earn (lose) money somehow and find a reason for it which is not true. And then talking about it, manipulate people who has no idea also and it keeps going like that. In this article, I will try to proof that these myths are not true.
1- Making Transactions are so complicated for small investors
This is basically not true myth at all. First of all, thanks to Online-Brokerage programs and tools, you even don't have to use any investment bank or company. If you think that your knowledge of market is enough and you have money to invest, Welcome to Club.
2- Big investors are controlling the market, small investors has no chance.
I'm hearing this mostly from the guys who lost their money in stock market. No, this is not true also. Of course if you have $100 you can not race with the guy who has $100K but this is a universal rule. Markets are controlling by invisibles and nobody can influence this forever. If something big will happen, yes it will happen soon or later. Maybe they can save the day once, but not twice.
3- Stocks go up, eventually will go down.
This is the No. 1 myth in the market. Some Analysts and famous-investors believe that also. If the price of the stock reached the peak (52w), you can not gain anything from that stock anymore and you should sell it. Or you shouldn't buy the stock if it reached at peak, because it will go down eventually. If this myth was true, stocks have to be all the time at the same price range,
As seen in the graph, from 2012 to 2014 June, Delta Airlines reached peak 15 times and some peaks even in the same day. Stock got hit by Ebola Virus and after June it go to down. So if you sell it directly after stock reached the peak first time , you will lose big opportunity.4- Stocks go down, eventually will go up
This is the brother of the No. 1 myth in the market. Investors find good stocks which has downward trend for a long time and investing money on it. Because they think that this is bottom, they can not go more down than this. When Enron start going down in 2000's, investors think that it is just a small recession and good opportunity. However, one year later Enron announced bankruptcy.
5- You have to invest to Market Leaders to gain
No, no, no. That is of course more secure to invest market leaders but that is not always acceptable while investing, I'm personally fan of growing stocks instead of market leaders. Because Market Leaders stocks (Ex; Google) can not grow more because it already reached the natural borders. As seen in Baidu: Search Engine of Billions article, Baidu is not the market leader but grow more than Google and Yahoo in one year and investors earned more money on that.
6- If you know P/E and PEG ratios, that is all you need.
I love P/E and PEG ratios also but you can not generalize every time 35 as a big P/E ratio and 7 is a low P/E ratio. Because you have to analyze that P/E ratio to industry. For example; if a stock has P/E ratio 30 and industry P/E is 55 YES THIS IS GOOD. Also for every industry, there are more tools to analyst.
Conclusion;
All in all, every investor and analyst has different measurement methods about how stock is valuable or not. If you go to nasdaq.com and look for the guru analysts you will see that every analyst has different measurement criteria and parameter. Some of myths which are above can be true for someone else so just leave comment if you disagree.
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