Myth #1    Making a Lot of Money in the Stock Market Requires Taking a Lot of Risk

While there are risk takers in all aspects of life, stock market investing actually offers the opportunity for long term, potential wealth for the average investor. Anyone who has the discipline and the time to learn the basics of stock investing may find that it is a lucrative way to amass wealth over time.

In many cases, stock investing may be less risky than certain real estate, commodity, or collectibles investing. Investing in your own business may be a greater risk than stock investing.

To minimize your risk in stock investing, choose stocks that have steady growth, choose stocks with earnings that keep pace with inflation and interest rates, invest slowly over a period of time, diversify your holdings (i.e., invest across different industries), and avoid putting more than 10 percent of your entire portfolio into one stock.

Myth #2    Buying Stocks Is No Better than Gambling

On the surface, it may appear that risking your investing dollars in the stock market is similar to taking your money to the casino. But stocks represent your purchase of ownership in a company. Gambling offers no equivalent. Stock ownership has value – the value of the company you’ve invested in.

Gambling offers no net gain. Money passes from one person to another. One’s losses offset the other’s gains, and no new wealth is created.

Myth #3    Only Brokers and the Wealthy Are Equipped to Succeed in the Stock Market

The Internet has made stock investing accessible to anyone who has a computer. Background research, anecdotal data, and online trading are options for anyone with a computer and the desire to learn about stock investing.

The average individual may have a slight advantage over brokers and fund managers in some situations. Average people can afford to take the time to invest for the long term. Brokers and fund managers may be under pressure to show quarterly and yearly gains, and may have to trade frequently to try and attain these goals.

Myth #4    Stocks that Have Fallen Badly Will Eventually Return to Their High Values

Stocks that fall will not always rise again. Making this judgment based solely on the fact that the price has fallen is a mistake. Many other aspects determine whether the stock has a chance of rising again, including the quality of the company.

Stock price is a reflection of how well its company is running its business.

Myth #5    Stocks that Are High Will Eventually Fall Again

Again, stock price is a reflection of how well the company is being managed. A well-run company should continue to see rising stock values. Occasionally, a stock may correct, experiencing a decrease of 10 percent. These are temporary phenomena, and can indicate a healthy market.

Myth #6    The Best Time to Buy a Stock Is when Its Value Is Falling

If a stock’s value is falling, it may or may not be a good time to buy. Generally, investors buy stocks with the assumption that the stock is going to increase in value. If the stock is falling, investor expectations are not being met. The best time to buy a stock may actually be when the stock is on the rise, because it is meeting investor expectations.

Myth #7   The Best Time to Sell a Stock Is when Its Value Is Rising

Again, a variety of factors need to be considered. If a stock’s value is rising, investor expectations are being met. The stock may well continue to rise.

Myth #8    Accurate Prediction Ability Is Crucial to Succeed in the Stock Market

Although it is easy to get caught up in the short term fluctuations of the market, few professionals are accurately able to predict market activity from day to day. One strategy is to focus on your particular investments, rather than the movements of the market. Stocks have been shown to give positive returns over time, so a long term strategy may serve you better than focusing on short term volatility.

Myth #9    Young Investors Can Afford to Take More Risks than Older Investors

It is true that older investors (nearing retirement) should invest conservatively, to preserve capital. But the opposite is not necessarily true for young investors. Young investors do have time on their side, but have large expenses such as buying a first home. With little disposable income, young investors should consider choosing stock from healthy, established companies and let time work to build their wealth.

Myth #10    A Little Knowledge Is Sufficient