Property Investments Are Relatively Safe
Unfortunately, this is not always true. For example if you put all your savings into the 20% deposit on a property, what you will get is a non-guaranteed asset which is 5 times your initial net worth. If the property prices were to drop by 10% when you are trying to sell, you can end up losing ½ of your net worth.
Bonds Don’t Make Money
Bonds generally make less return compared to stocks. On the flip side, bonds usually don’t lose as much in a market downturn. Many institutional investors like banks hold fixed income securities, because they have the potential to outperform stocks during a bear market.
Analysts’ Recommendations Are Always Right
Analysts’ research can provide investors with more insight, but you have to do your own research to understand if a company can be profitable in the long run. In general, Analysts are much more likely to rate stocks buy than sell, and provide outlooks that are far too short term. Investors should never assume all Analysts’ recommendations are correct without doing their own research and homework.
Markets Are Efficient
The Efficient Market Hypothesis (EMH) is a theory in Financial Economics which believes that all investors are rational and new data is instantaneously factored into stock prices.
However, many investors, including the likes of Warren Buffett have disputed the EMH both empirically and theoretically. The EMH was also under renewed scrutiny after the 2007-2008 stock market crash whereby many investors continued to buy stocks even when prices were too high given expected returns.
Misconceptions can wreak havoc on your investment portfolio. Whenever you need to make any big investments, it is strongly recommended that you consult an experienced and reliable financial planner, because he or she may be able to correct any misconceptions you may have.
