Busting 10 Stock Market Myth and Fear

Answer honestly! how many times have you thought to enter stock market? There had always been something that never let you do that. Even if you did enter, are you really trading stocks? There had always been something to stop you trade independently, right? You are not alone. FundsBase has assigned a term for that something as “myths”. As the term itself suggests that it is not something real, it is myth. Stock market myth.

Before even outlining stock market, FundsBase feels a huge requirement to bust the most viral stock market myths. Busting these myths will provide you a crystal-clear, robust and independent base to understand, digest and apply the concepts of stock market. These myths are not new but have grown along with stock market. As various stock markets increased around the world, these myths spanned too. From one mouth to another ear and on and on. Then globalization, added with the online social connectivity platforms made the damage worse. These myths have rooted themselves so deeply that they act as a crab which will never let you enter the stock market. Thus it’s very important to bust these myths first, to remove the tangible crabs associated with stock market.

FundsBase is confident that by the time you will complete this article you will feel free and probably give that sweet-smile to yourself asking “why I was so afraid of stock markets?”.

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Stock Market Myth No 1 – Stock Market is Gambling

This deepest rooted stock market fear and busting this fear consist three parts –

1. Gambling is bad
2. Gambling is associated with stock market so stock market is also bad
3. If the truth is established that stock market is not associated with gambling then stock market is not bad.

Let’s move ahead and deal with these three parts altogether.
Gambling as per geo-spatial laws, may differ from one place to another in terms of being legal or illegal but certainly there are more persons on this planet who like to shirk from gambling. Reason? While growing up we all listen stories or see live examples of persons who destroyed their lives because of gambling. Of course we listen stories or see live examples of persons who became millionaires overnight too, because of gambling, right? But we are mature enough to understand and foresee the stability and longevity of these overnight millionaires. They don’t last long. Usually they lose all the money to the same source they won from i.e. gambling. Which leads to a conclusion that the money earned from gambling is not long-lasting. It’s just by chance that you win.
There is no concept to win, no logic to go to next level of success. To be specific, there is no satisfaction attached to that success because you don’t find any of your own input to that success. There is no genuine logic/concept that can be applied to achieve same success. This leads to a wise conclusion that gambling can not be a genuine and reliable source of income.
Above conclusion is so true that we all respect and accept it without any unnecessary debate that gambling is bad. Keep this conclusion in mind while reading further.
What does one do in gambling? He/she spends money to take a chance so that he/she can increase the invested money. There are only two results, either he/she wins or loses. But the most surprising and interesting fact about the result is that both winner and loser want to play again. Have you gone through this? No I have never gambled but I like to study humans and their psychological behaviour. I like to derive interesting facts about human psychology. Coming to the thought-process after result of both winner and the loser. They both want to play again. Winner has a logic that his luck is working thus if he plays again he will win again. But if we go by the same logic, loser is having a bad luck so he will lose again. Why is he going to play again if he knows that he is going to lose? But here on loser’s brain a very different thought process is building up. He/she has lost some money and wants to get it back. He/she is so desperate to get it back that he/she completely ignores that history can get repeated and he/she may lose again.
Second result of this gambling is not necessary to discuss, instead the reason behind taking that second chance once again is very important. Both see a chance to increase the money they brought. That is the whole idea behind gambling i.e. a chance (may or may not) to maximise their capital (the money they brought).
This idea of “a chance to maximize the capital” has been so closely associated with stock market that your ethical mind will perceive the term stock market as pure gambling. Which is certainly not the truth.
So who are the one’s who have put effort that you should see stock market as gambling? These are two types of persons. First one’s have no agenda. Because they don’t/can’t trade in stock market due to their own personal reasons (social/financial), so they don’t want you to. Thus they spread rumors to stop everyone else they can. Second one’s do have agenda. They are the one’s who like having/creating monopoly. These insecure monopoly creators are found in every field. They are the highly professional stock market traders. They don’t want lots of unknown people (who are out of their influential reach) to enter stock market and disturb their plannings regarding stocks of certain companies.
Don’t fall prey to someone’s agenda to stop you entering stock market.
There are well established concepts and theories (FundsBase will reveal in this series) to analyse a company’s growth and take decision whether you want to invest in that company or not. These concepts are so easy that anyone can understand and apply them.
Stock market is nowhere near gambling. You don’t play stock market. In stock market you invest in a company, just like other investments. You take your time to study charts and patterns.

You take time, not chance!
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Stock Market Myth No 2 – Stock Market can Make You Rich/Poor Overnight

This stock market fear or stock market myth is merely an extension of gambling myth which has been busted above.
When you learn the basic concepts of understanding the charts and patterns of a company, you become wise with your money as well. You know what you are doing. You take your time. You never invest too much money in one go. You plan wisely. You follow your plans sincerely. Which gives you result over a span of time. It may take days, weeks or years. This span gives you freedom to review and improvise your plan and investment.
Yes it takes time. Nothing happens overnight except exceptions, neither success nor failure. Go ahead with FundsBase Stock Market Series and gradually over time you will become more wise with you plan and money as well.
Only knowing and applying that knowledge can set you free from fears.
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Stock Market Myth No 3 – Need to have Lots of Money to Start

Really? If yes then exactly how much will be equal to that “lots of money”? How much lakh or how much crore?
No figure comes in mind, at least to my mind.
The truth is that you can start with just any amount in your trading account. Trading account will be explained later in this series. For time being you can consider it as a separate bank account specifically to buy stocks. Yes you can start with just any amount and earn profit as well.
Feeling happy?
Let’s proceed further.
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Stock Market Myth No 4 – Need to be Very Intelligent

How do you see yourself? On a scale of 1-10, 1 being highest level of foolishness and 10 representing highest level of intelligence, where do you put yourself?
Be very honest with yourself.
May I ask what was the criteria you applied to find yourself a place on that scale?
Was your answer based on views of your peers? But they carry a judgement regarding you.
They may be your friend or envy. Their views can’t be trusted.
Was your answer based on the recent appreciation/insult in family/office or social network. But that may just be a situation based event. That also can’t be static.
Was your answer based on your degree/scholarship/merit? But that is a result of bunch of selective questions you knew/didn’t know the answers of. That also can not define you completely.
So what is the criteria of being intelligent/stupid?
Intelligence is a relative term. It is purely a perception of someone else about you. If you know something that other one doesn’t know you become intelligent in his/her opinion but that’s not a stable state. As there will be something that you don’t know and other one knows.
So can we please stop this intelligent non-sense over here.

Conclusion of the discussion is that you just have to know that subject so that you can understand that subject precisely. This precise understanding will empower you to take independent decisions.
FundsBase will help you understand stock markets so that you never oscillate on intelligent-stupid scale again. Just sit tightly with your patience-belt fastened.
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Stock Market Myth No 5 – Need to Follow Experts

Knowledge has no ownership
There is no-harm learning from someone who knows more than you. But there is a difference between learning and blindly following. When you start following someone blindly, you unknowingly become his/her slave. You lose your freedom to take independent decisions. You never develop your own flavor of taste. For every move you will need their opinion.
If you learn and understand stock market basics honestly, one day you will start making your own decisions in stock market. Later when you get confident start helping others. No that will not happen over month. Initially you may fail. But the one’s you want to follow for tips did fail initially too but they kept on learning and experimenting. That’s why today others are listening to them. They have gone through the pain to learn.
The whole idea of FundsBase series on stock market is to make you independent to take your own decisions in stock market.
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Stock Market Myth No 6 – High Income Tax on Profits

Yes! profit (termed as capital gain in stock market) from stock markets is also seen as income and you have to pay tax on that. The myth is that this tax is too high and you have to apply lots of manipulative strategies to avoid giving these high taxes.
Firstly you can not apply any sort of manipulative strategies to avoid these taxes as you PAN (In India) is required to open a trading account. Your PAN number tracks all the transactions you make and is readily available to income tax department. So file your income tax regularly every year to avail lots of advantages.
Capital gains are of two types –

1. Short term capital gain
2. Long term capital gain

When you sell a stock within 12 months of buying, the gains earned from it is called Short Term Capital Gain (STCG) and is taxed at 15%. It doesn’t matter if you come under tax slab if 10%, 20% or 30% you will be taxed at special 15% which is a very good news for you. Moreover if your total income excluding short term capital gain is less then the minimum taxable income i.e. 2,50,000 for financial year 2016-17, this gap can be adjusted from your short term capital gain. When this 2,50,000 is reached then the remaining short term capital gain is taxed as 15% + 3% Cess on it.
When you sell a stock after 12 months of buying, it is called Long Term Capital Gain (LTCG). Good news is that you don’t have to pay any tax on LTCG.
Happy? Lets’ move further to bust the next myth.
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Stock Market Myth No 7 – Know Everything about a Company before Investing

What do you do when you are new to a city and feel hungry but don’t know the language of that city. You can’t ask anyone about the best restaurant on your street because you don’t know their language. You scan the restaurants that attract crowd. So many people can’t be wrong, when they are coming out of that restaurant with a smile on their face. You presume that it is a restaurant which serves good food. In analysis domain, what you just did is called finding a pattern/trend.
Beware! patterns can be plotted to do manipulations.
Above discussion was to highlight the importance of analysis in stock market.
And you don’t need to know everything about a company to buy its stocks just like you need not know everything about the restaurant. You just need to practice some theories, apply those theories and refine your results.
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Stock Market Myth No 8 – A Company Share gone down will rise tomorrow and vice-versa

I strongly presume you must have been a victim of someone’s manipulation (everyone has been at least once) in your life. That real world scenario do prevail in companies listed in stock market as well. Companies are set up to earn profit from the work they do. But some companies are bogus and set up for manipulative strategies. Their owners also make sure that they should look like a genuine company.
Sometimes it is very tempting when you see that a stock which had been at high price has gone down and you want to buy it so that you can book profits when it again goes up. You need to understand that there are several reasons that a stock price goes up/down. A stock price gone down may never rise, it may go to lesser price one day. Of course it can rise as well and may reach to all time high too.
Thus you should not fall prey of such situation and should do proper research.

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Stock Market Myth No 9 – High priced stocks are better than low priced

Higher stock prices fluctuate more than the lesser ones. That is a truth. So if you think to invest more money in higher stocks just because you may get more profits because of fluctuations can be a bad idea. What if with lesser money in lesser value stock can give you more profit. In a worst case how will you feel if that high stock market price goes down, much down than the price you bought it and didn’t seem to rise?
So don’t be trapped in the fanciness of higher priced stocks.
Lower priced stocks if properly researched and picked can make fortune for you one day.
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Stock Market Myth No 10 – Penny Stocks are better than Higher Priced Stocks

This one is completely opposite case of the previous myth. To bust it, you need to see it from a very different perspective.
Penny stocks are the ones which are priced at very low price usually below Rs 10/. You may find these stocks as most attractive because you can buy them at such low price and even if they increase a bit you can book profit.
Remember “All that glitters is not gold”

As discussed about bogus companies when busting myth No 8, these companies are set up to do some manipulations. It is widely accepted in stock market that some of such companies have penny stocks. No, not all penny stocks are bad. Some have given high returns to share holders.
Just don’t stick with the myth that penny stocks are better. A bad picked penny stock can make you upset too badly.
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Also Read – Basic requiremetns to enter stock market

Also Read – Reasons for stock market : Why you should enter or not

Summarising Stock Market Myths

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