12 Jun The Four Major Myths of Investing
When it comes to investing, the most important step to take is to learn about investing. Once you’re knowledgeable about investing, you will be able to analyze your options and discern a good investment from a bad one.
For the month of June, we’re focusing on social impact, investing, and giving back on the blog. Tricord Global meshes all three of these topics together into one great cause. You invest money which makes a huge impact and you give back by providing a fresh start for someone in need. You can read more about it HERE.
Back to our talk about investing…
Warren Buffet is one of the richest men in America. In fact, his net worth is over 66 billion dollars. Wow. He said this about investing: “Risk comes from not knowing what you’re doing.” Warren lives his life by using a certain set of values to invest and make life decisions. He is obviously very successful at what he does, so we should follow his example and use knowledge and discernment when investing.
So, the first step to being knowledgeable about investing is to combat the 4 myths of investing. Once you understand the myths, gaining the knowledge about investing is easy.
Here are the Four Major Myths of Investing:
Myth 1 – People who have money know how to invest it.
The Vanderbilt family had an enormous inheritance, but without the knowledge of how to protect and grow their inheritance, they lost it. (You can read more about this story in my book, Money Mastery.) This is the same reason lottery winners lose their resources quickly.
The amount of money in the bank does not signal wealth. An example of this is the story of Bernie Madoff, the operator of one of the largest financial fraud schemes in the U.S. His victims had money, but they didn’t know how to invest well. Some of these victims included people you would never think could struggle with finances. People like Steven Spielberg and Larry King fell victim to this scheme. If they had not believed the myth that people who already have money must know how to invest it, they would have made a better decision about investing.
Myth 2 – People who have built successful businesses know how to invest.
I met a man on a cruise who owned 11 fast food restaurants. They were completely paid off. He had $13 million in the bank and a 12,000 square foot home that was paid for in totality. Yet here he was asking me how to increase his investments. His dad was a surgeon who left his mother broke. Despite coming from money, he did not come from wealth. No one taught him to make money on the investing side. He only knew how to make money through his fast food restaurants.
Just because you know how to make money in a specific investment does not mean you know how to make it in all investments.
Myth 3 – People in the financial services industry know how to invest your money.
Don’t let this scare you, but it’s simply the truth. The largest bankruptcy in U.S. history happened to a global financial services firm. In 2008, with over 26,000 employees, the Lehman Brothers declared bankruptcy with $639 billion in assets. This is an absolutely mind-boggling amount, but it tells you this truth: the financial services industry is not always empowered with investment wisdom.
This story shows you how you need to be walking in knowledge, understanding and wisdom when it comes to finances. Do you have to personally invest everything? Of course not, but you need to gain the wisdom and discern about where and with who to invest.
Myth 4 – The richest Americans are primarily invested in stocks and mutual funds.
This might be my favorite myth to bust, because investing in stocks is not the only way to go. Bill Gates built his wealth through a business – Microsoft. Warren Buffet purchased entire companies. This isn’t to say that these businessmen are not invested in stocks or mutual funds. They may be and probably are, but to assume that their wealth was built this way is highly unlikely.
Remember that the first step to investing is to become knowledgeable about investing. As you can see, there are simply too many ways that investing is misunderstood.
Also, consider investing with Tricord Global. Find out more information here if you’re interested!
Tell me in the comments: What are some ways that you can become knowledgeable about investing?