Only 11 Spots Left in Free Investor Education Program!!! 5 Common Myths About Gambling vs Investing
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Here’s what one mastermind member said about this morning’s session:
“Super interesting. I didn’t think that such an intellectual book about stocks would also challenge my beliefs and emotions.”
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Here are 5 Common Myths About Gambling vs Investing
Myth #1 Bonds are Safe Investments, Stocks are Not
This is not true if you are buying bonds in a company that is going out of business.
It’s also true that stocks are good investments when bought wisely, as Warren Buffet does.
In addition, there is good evidence that investing in the stock market index over a long period of time with small regularly timed investments will tend to mimic the market’s average growth over time.
There are good bond investments and bad bond investments just as there are good stock investments and bad stock investments.
It comes more down to who is investing, and are they doing it wisely or not.
Myth #2 Purchasing Investments with Cash is Safer than Borrowing to Invest
This is like Dave Ramsey, do everything in cash and don’t borrow money.
This is good advice for borrow happy people, who borrow to spend and not to invest wisely.
However, isn’t it true that the riskiest investments, such as penny stocks or investment properties, are the hardest to borrow money to invest in?
Isn’t it true that it’s easier to borrow for a primary residence BECAUSE it is less risky?
Robert Kiyosaki talks about good debt vs bad debt.
Good debt buys you assets that make you money net of all expenses including your debt payments.
Bad debt buys you doodads, that take even more money out of your pocket.
Myth #3 Buy to Hold is Investing, While Buying for a “Quick Turn” is Gambling
Sometimes don’t people buy and hold an investment too long because they are hoping they will make back the money they lost (I am currently guilty of this).
If you buy and investment and it grows in price to a point where it has become overpriced, isn’t it wise to sell and wait for the price to adjust?
Is it so simple that buying to hold is investing, or are we just being lazy here…or justifying our mistakes.
Myth #4 Investing is to Create Income, Gambling is Waiting for Profits with No Income
Great companies pay shareholders dividends yes?
It’s true of many, but aren’t there also companies that don’t pay dividends to improve their business or build their reserves?
Don’t some of those companies have their share prices increase substantially over time (like apple?)
Wouldn’t you say they were a good investment even though they didn’t pay dividends?
Myth #5 Safe Securities are Investment Worthy, Risky Issues are Not
Safe securities are companies like Apple, Google, Amazon or companies in the S&P 500.
In February virtually everyone would agree with this.
But if you put all your money in the S&P in February you would have lost 50% in March…and if you left it there, you’re still down 20%.
So how safe was that investment?
Now if you had been invested in Zoom, you would have done great in that same time period.
Was Zoom risky?
Was the S&P safe?
Hmmm
Conclusion
I hope you enjoyed this post about the 5 myths about gambling vs investing.
It’s not so clear cut when you look at things carefully.
It really is a case by case basis.
We discussed what investing really was in today’s security analysis mastermind (there are only 11 free spots left so register here now!!!), which is our Free Investor Education Program.
All of this came from Chapter 4 of Security Analysis by Benjamin Graham and David L Dodd.
If you are interested in becoming a wise investor, then I suggest you register for the Free Investor Education Program NOW before the 11 free spots are gone.
14 of the Free spots are already taken.
Hurry now stop gambling in the market, start investing instead!