Lie #1: Investing Is Too Risky

By educating yourself in investing, you will know what you’re doing,and that will take away a lot of risk from your investment decisions. Like driving, swimming etc.. investment for the long terms also can be learned.

So, investing in the stock market isn’t risky if you know how to do it the right way. What is risky is taking advice from people who don’t know what they are talking about all the time. And the biggest risk is…not investing at all.

Lie # 2 Finance Knowledge is all what we need

If financial education was what was required to make money from stocks, the stock market experts would’ve become rich by investing their own money than by selling worthless stock advice to gullible small investors.

Take a look at one of the worst disasters ever to take place in the history of financial markets. Learn the rise and fall of LTCM, or Long Term Capital Management – a speculative hedge fund that operated in the US in the late 1990s.

What these people fail to realize that intelligence doesn’t always translate to real-world ability, and thus they tend to overestimate the quality of their work. In short, financial education appears to increase our confidence without improving our abilities, thus leading to worse financial decisions.

The successful investing is all about having the right amount of emotional intelligence.

Lie # 3 The Good Portfolio shall beat the market

So what is the problem with this approach?

Isn’t sensible investing all about beating the market or earning more money than what some other fund can earn for me?

This ‘beating’ stuff has been long ingrained in our brains as the only metric to show our power, intelligence, and value over the ‘beaten’.

As a scene in the movie 3 Idiots suggests, “It feels bad when a friend fails, but it feels even worse when he comes first.”

Well, the harsh (but real) truth about investing is that ‘beating the market’ is not a sensible, proper goal.

The only goals of investing you must have are:

• To keep money (capital protection), and
• To make money (capital appreciation).

These follow from Warren Buffett’s two rules of investing:

• Rule No.1: Never lose money.
• Rule No.2: Never forget rule No.1.