5. I watch CNBC and Fox Business non-stop- I can make money trading on real-time information.
Reality: There are computers and professionals who can trade faster than you. Also, if you have noticed, some news that seems positive at first ends up being a negative. Also, the first news out is often incorrect and is followed up by more accurate information later on. Trading on rumors is dangerous and unpredictable.
4. He has a PHD, an MBA, and is a CFA charter holder. He can make me more money.
Reality: If it were that easy to get superior results, everyone with advanced degrees would be the best investors. But this is not so. All those degrees tell us are that they understand finance, not that they know how to make money. Ever wonder why professors aren’t the richest people in the world?
3. My local bank branch offers all my investment needs.
Reality: To sell stocks, bonds, mutual funds and insurance requires almost no qualifications beyond passing a general exam. Your bank representative may not have even gone to college let alone have any experience in finance. Top investment professionals DO NOT work at bank branches.
2.Bonds are much safer, why bother with stocks?
Realtity: Bonds, on the whole, are less volatile, but they are exposed to interest rate risk. Unless you hold your bond until maturity, the value of that bond can fluctuate greatly. In the current environment, yields on fixed income are less than historical inflation. That means that you are locked into an investment that will continue to lose buying power.
1. My money is with XYZ large bank. They didn’t get so big by not knowing how to make money.
Reality: It’s true, they know how to make money for themselves, but no one said they knew how to make money for clients. Big banks are rarely known for good investment performance, but they offer convenience, which is the main reason they get any business. The last financial crisis of 2008 was mostly due to big banks making poor investments.