Investing Fallacies

The fallacies of investing:

1. The belief that holding an investment long term is safe and profitable.

2. Diversification prevents loses.

3. Mutual Funds are safe.

4. Dollar-Cost Averaging is smart.

5. Financial Advisors are investment professionals.

These fallacies lead to financial suicide for many investors.

Investors invariably purchase investments believing their money is safe and hope their investment will be profitable. Many get the ‘song and dance’ sales pitch about diversifying and how well some Mutual Fund is doing. And for the small investor, the routine is to sell them on the idea to Dollar-Cost average by buying a few shares each month in order to fit it in their budget.

There is nothing wrong with Dollar Cost averaging, diversifying, or investing in Mutual Funds. But to do any of those at the wrong time is sheer stupidity, and relying on a Financial Advisor to tell you when to invest is even worse. The Financial Advisor is a sales person, nothing more. They earn a commission each and every time you invest through them. Is that person going to miss the opportunity to earn a commission by telling you to wait for better market conditions before risking your hard-earned money? No! They will immediately sell you some investment regardless what the market might be doing, or may be about to do.

The biggest mistake most every individual investor makes is investing at the wrong time.

Let me ask you this. When you go shopping, do you wait for a sale? Do you always pay the sticker price when buying a car? Yes, you probably wait for a sale to buy non-essential items. And no, you don’t pay the sticker price when shopping for a car. You don’t make any major purchase without first doing some form of research and shopping around.

Then why do investors invariably risk their money without first understanding the market and price movements?

In order to invest or trade in Stocks, Mutual Funds, or even Options or Forex, it is imperative to know AND understand price and market movements that can only be learned from Technical Analysis. You Should NEVER attempt Trading or Investing without it!

Whether you are investing or trading, do it right. As a Trader for 25 years, the two absolute worst mistakes most people make are:

1. Try to get their investing knowledge for free. They search the internet for free information, read articles on Brokerage House Websites that are nothing more than advertisements, read little cheap ebooks, or watch CNBC and then lose their money. Free stuff, articles, 15 page ebooks, and sensationalized TV channels are NOT educational or helpful. They will do you more harm than good.

2. Others think they do not need to be knowledgeable about the market or price movements because they are invested in a Mutual Fund. That could not be farther from the truth. Remember, when the market falls, so do Mutual Funds.

Charting and Technical Analysis places the odds in your favor.

Never risk one-dollar of your money without putting the odds of making a profit in your favor. To invest ‘willy nilly’ and hope for a profit is nothing but a crap shoot.

Let me put it this way; you can make wise investing and trading decisions. You can learn to be successful. The question is, How?

Will you learn by making mistakes?

Will you learn by first losing money?

Or, will you spend a small amount for knowledge instead of losing 100 times that amount?

Before you risk your hard-earned money, learn when to buy, when to sell, and how to protect your money from market corrections and Bear Markets.

"We ALL pay for our education regardless where we get it".

Either become a knowledgeable investor capable of making your own wise investing decisions, or keep your money safely in the bank. It really is that simple.

~Fred McAllen