In the investment management world, there are many myths circling that are not all rooted in truth. We set out to debunk four of the most common myths. We’ve also included some tips to help you navigate the world of investing. We hope they’re helpful!
Myth #1: Popular companies always make good stocks. False.
Stocks are priced on a number of factors including share structure, earnings and revenue growth, company debt levels, economic news and various other factors.
So, whilst a brand might seem like a safe bet because everybody knows and loves them, it’s not always necessarily the case. For example, Twitter is one of the most popular and successful social media brands in history, however, stocks have plummeted over the last three years.
At Infinity, we choose shares based on deep fundamental and technical analysis that comes from years of experience.
Myth #2: If it has performed well in the past, it must be a good investment. False.
Whilst track record is an important indicator of a stock’s performance, there are many more factors that need to be considered to determine future performance.
In fact, we often find that assets that have performed the best in recent years may be the ones poised for a downturn as they can become so overvalued that they become riskier choices.
Myth #3: You should buy stocks during an IPO. False.
Initial public offerings make headlines in the press, and it may seem desirable to get in at the ground floor. However, there are countless examples of companies that failed to come out of the gate strong. In fact, many companies have seen share prices dip well below IPO levels.
For example, food ingredients group Marley Spoon listed in July after raising $70 million from an offering pitched at $1.42 a share. Its shares are now trading at 41 cents, that’s a fall of 68.3%.
At Infinity, we often find it makes sense to wait until after an IPO to see how a company’s stock performs.
Myth #4: You have plenty of time to start investing. False.
The earlier you decide to get exposure to the market and start investing, the better. This is because compounding becomes highly effective over the years, lifting your portfolio’s value as it collects dividends and interest, and increases in value.
As the saying goes, the best time to start investing was 20 years ago; the second-best time is now.
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We have put together a guide to help you choose a financial advisor who is right for you. Throughout the guide, “5 Questions to Ask your Financial Advisor”, we list questions that we recommend you ask when you first meet with a financial advisor. Based on the advisor’s response to these questions, you will be able to determine whether they are the right fit for you.
This guide covers topics such as fee structure, how money is invested and how your goals will be met. By asking a financial advisor these questions when you first meet, you can ensure your relationship is transparent from the start and that you are both on the same page.
To download our guide, “5 Questions to Ask your Financial Advisor”, click the yellow button below.
