Myths About Investing in the Stock Market

A lot of people stay out of the market because of things they've heard that aren't true. Here are seven common myths and what's actually going on.

"You need a lot of money to start." Fractional shares mean you can start with whatever you have.

"Investing is basically gambling." A bet has nothing behind it but the odds. A share of a profitable company is a piece of a business that earns money.

"You have to watch the market constantly." A long-term, automated plan needs far less attention than people assume.

"You need to be an expert to invest well." You need two basics: diversification and time horizon. A single total-market index fund holds hundreds to thousands of companies, so you get diversification without picking stocks. And match the money to its timeline: money you'll need within five years shouldn't take the market's full swings, while money you won't touch for 20 years or more can ride out a 2008-style drop. Everything past that is fine-tuning. Best Places to Grow Your Money as a Service Member shows which account fits which timeline.

"The market always recovers quickly." Sometimes it does, and sometimes it takes years. After the dot-com crash, the S&P 500 took about seven years to get back to its old high. After 2008, it took about five and a half. In 2020, it fell 34% in 33 trading days and recovered in about five months, one of the fastest on record. You can't predict which kind of crash you'll get, so your plan has to survive the long one.

"You can get rich quick with stocks." Occasionally, sure. Reliably, no. Even professionals struggle: over 15 years, 89.5% of actively managed large-company funds trailed the S&P 500 (SPIVA, year-end 2024). If full-time pros with research teams can't beat the index, betting your plan on picking the next hot stock is a mistake.

"Once you invest, you can't touch it." A regular brokerage account is yours to sell anytime. Retirement accounts like the TSP and IRAs are different: pulling money out before age 59½ usually means taxes and a penalty. Not touching your investments is a choice, and a good one, but it isn't a lock.

Knowing which myth you've been operating on is the first step to not letting it cost you.

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Disclaimer: I am not a financial advisor. The information provided here is for educational purposes only and should be verified independently. See the full Disclaimer.