Today, as I take another break from the day-to-day investment cycle and take you a little further down the path that led me from Wall Street banker to Main Street financial guide, I want to address a few more commonly held myths regarding investing and the financial markets…
I’ve already “busted” a few in an article I shared with you several weeks ago in which I explained why you don’t have to be rich, an expert, or a market timing wiz to become a successful investor.
When you get finished reading today’s article, feel free to navigate back to that one to refresh yourself or catch up if you missed it the first time.
But I digress. I’m here to bust new myths, not rehash the ones we’ve already addressed. So, without any further stepping on my own toes, let’s get down to brass tacks…
Investing Is NOT Gambling
A lot of people will tell you that investing in the stock market is nothing more than gambling.
But having been in this game for over a decade, helping people like you get on the right track for a sweet retirement, I can tell you for a fact that’s just not the case at all.
Investing and gambling might both involve risk, but other than that, they’re worlds apart…
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Investing, however, is a whole different ball game. It’s about strategy, research, and making calculated decisions. You’re not leaving it all up to chance; you’re in the driver's seat, making informed choices.
Another major difference is the time frame…
When you put your money in stocks, bonds, or other assets, you’re playing the long game. You’re watching your money grow over time, benefiting from compounding, dividends, and interest.
And when you buy a stock, you’re essentially buying a piece of a company. You’re investing in its future success. If the company does well, so do you. It’s a value creation game.
Gambling is just money changing hands based on chance. There’s no ownership or lasting value.
And the thing that really sets them apart is that as an investor, you’ve got control. You can diversify your portfolio, choose different asset classes, and change your strategy as the market evolves.
Gamblers, however, are at the mercy of chance.
In fact, I’ve seen it firsthand. I had a client — let’s call him Mike (you know how I handle these names by now).
He was skeptical about investing. Thought it was too risky. He said he’d already lost enough money as a young man betting on basketball games. He was better off just keeping his savings at the bank.
I’m sure you can imagine my reaction to hearing my profession being equated to illegal sports betting.
But hearing he was banking (excuse the pun) on a savings account to help reach retirement made me forget any barb I might have initially felt.
Fortunately, after a thorough explanation of the differences (and some coaching), Mike dipped his toe in, started small, and built a diversified portfolio.
Fast-forward a few years and his investments were outperforming his old savings account by leaps and bounds. And now, a few more years later, he’s on track for a retirement that’s looking pretty darn good.
So here’s the bottom line: Investing isn’t gambling. It’s about making smart decisions, playing the long game, and building wealth over time.
But that’s far from the only myth that often holds people back from investing. And the next one is far more common than you might think.
In fact, you might have fallen victim to it yourself and not even realized…
Past Performance Does NOT Guarantee Future Results
Just because your team won the Super Bowl or World Series last year doesn’t mean they’re going to keep doing it forever. That just makes sense, right?
Still, this myth’s making an appearance here because a lot of people believe that just because something performed well in the past, it will keep doing so in the future.
But relying solely on past performance when making investment decisions is like driving forward with your eyes glued to the rearview mirror. It doesn’t end well.
Markets change, companies evolve, and a whole bunch of factors come into play. Relying solely on past performance? That’s ignoring the here and now, and that’s a risky game to play.
But it’s something we saw very recently in the crypto craze that swept markets from 2020–2021. Every single coin, token, and what-have-you was going up and going up big!
People were buying anything and everything and making a profit on it. But then the cracks started to form and prices started to dip.
And instead of assessing the situation and looking at how the fundamentals of the economy were changing, many investors doubled down and bought the dip.
These markets had dipped before, but they always came back up. So they must come back up again…
But then the prices didn’t come back up. Cryptos fell further and further and further down the charts, some losing nearly all of their value.
And yet people held onto those investments in meme coins and monkey pictures, convinced they’d start ripping again. Why? Because they did last time, of course.
I’ve worked with quite a few people who got caught up in that and lost a lot in the collapse. And I’ve done the same thing with all of them…
We sat down, rolled up our sleeves, and got to work on building a more balanced and thoughtful investment strategy.
We looked at the fundamentals, considered the potential risks, and diversified their portfolios.
And you know what? It’s already paying off…
Their investments have all become more stable and many are spinning off cash (something no crypto does), and those people are all now on a much steadier path toward fulfilling retirements.
But before we got started doing all of that, we had to address one more myth that seemed to plague the crypto investors the most, but is something many fall victim to no matter their asset of choice…
High Risk Does NOT Always Lead to High Reward
Now, this one is probably one of the most commonly held myths about investing I’ve ever encountered. And there’s a very good reason for that…
You see, risk and return most certainly are related. If they weren’t, our motto wouldn’t be “Fortune favors the bold.” It would be “Fortune favors the sheep.”
There most definitely is a correlation between risk level and potential return. It’s just not as simple as saying that more risk equals more return.
It’s a little more nuanced than that, but not so nuanced that we can’t break it down today and dispel this extremely commonly held myth, too…
In the world of investing, risk and return are like two sides of the same coin. Generally, if you want the potential for higher returns, you have to be willing to accept a higher level of risk.
But — and this is a big enough "but" that Sir Mix-a-Lot might perk up — just because an investment is high risk doesn't mean that it's guaranteed to give you high returns.
Some high-risk investments have the potential to soar. I run a nanocap investing service called Future Giants focused on just such high-risk, high-reward opportunities.
My colleague, the impressive Alex Koyfman of Energy and Capital fame, runs a similarly focused microcap investing service called Microcap Insider.
We’ve both helped investors pinpoint some incredibly lucrative, albeit highly speculative, investments.
We mitigate the risk as much as possible through our thorough research, but had something unforeseen gone wrong, those successful investments could have just as easily crashed and burned.
You see, they weren’t guaranteed to give us a high return just because we were taking on extra risk. But they did give us a higher return because they were risky when we advised our investors about them.
So what’s an investor to do? Well, it’s all about finding the right balance…
It’s about building a diversified portfolio that spreads out your risk while still giving you the potential for those blockbuster returns. Then you don’t have to swing for the fences with every investment.
It’s all about finding the right balance that fits both your risk tolerance AND your goals. Then you can play smart and not just play big.
The Bottom Line
Today, we've taken a good, hard look at some more of the big myths swirling around in the investment world.
From the notion that investing is just a fancier form of gambling, to believing that a stock's past glory guarantees future success, to the idea that you've got to risk it all to win big — we've covered quite a bit of ground.
Now, before I leave you for the day, let’s make sure we’ve got a few things straight…
First, investing is NOT like throwing your money on a roulette table. It’s about making calculated decisions, not leaving it all up to chance.
Yes, there are risks, but it’s not about hoping for the best. It’s about playing smart, understanding the market, and sticking to your strategy.
Second, past performance is a helpful metric, but it’s not a guarantee. The market is always shifting, and what went up yesterday might not go up tomorrow. It's vital to stay on your toes, keep learning, and not get stuck in yesterday’s success stories.
And third, as for risk and reward, it’s all about finding that sweet spot that matches your comfort level.
Yes, higher risk can lead to higher rewards, but it can also lead to bigger losses. It’s about striking the right balance, diversifying your investments, and playing the long game.
After more than 10 years in this business helping folks navigate the ups and downs of investing, I can tell you that knowledge is power.
Stay informed, keep your head on straight, and remember: Investing is a tool that can help you reach your financial goals, but it’s all about using it wisely.
Don’t let any of these old myths hold you back. Your dream retirement is waiting, and investing is the most important tool you have to help you get there.
And I and the team here at Wealth Daily are here to help you learn exactly how to use it to your best advantage.
To your wealth, Jason Williams After graduating Cum Laude in finance
and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private
sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team
responsible for billions of dollars in daily trading. Jason left Wall Street to found his own
investment office and now shares the strategies he used and the network he built with you. Jason
is the founder of Main Street
Ventures, a pre-IPO investment newsletter; the founder of
Future Giants, a nano cap investing service; the editor of Alpha Profit Machine, an
algorithmic trading service designed specifically for retail
investors; and authors The Wealth Advisory income stock
newsletter. He is also the managing editor of Wealth
Daily. To learn more about Jason, click here. Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on.
To your wealth,
After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; the editor of Alpha Profit Machine, an algorithmic trading service designed specifically for retail investors; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.
Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on.
P.S. I want to make sure you didn’t miss the research I sent out yesterday about the booming EV industry, the government funding to build a massive network of chargers, and a group of investors who are getting paid every time an EV plugs in to get charged up.
It’s one of the most impressive income-generating programs I’ve ever seen. And considering how tough things have been lately and how expensive everything keeps getting, I’m trying to help as many people as possible get a share of it as quickly as possible.
So make sure you get all the information today so you can get on board before the next payment comes out, which should be just in time to help with that Christmas (or other holiday) shopping that’s going to be all the more expensive this year thanks to that “transient” inflation that just won’t go away.
You can get all the details here and start collecting your payouts as soon as next month!