Myths and assumptions can be detrimental to your success in all areas of life – including achieving your financial goals. When it comes to investing, it's vital to separate fact from fiction. Here are three common myths you'll want to erase right from the start.
- Saving is investing.
If you’re putting money aside in a low, fixed interest rate savings or money market account, this isn’t investing. This can offer a cushion for emergencies and unexpected spending needs, but it’s only one piece of a financial strategy.
Investing is using your money to potentially create more money over a period of time.
Some people may shy away from investing, thinking it's too risky. Although investing does come with risks, not investing can also be a risk to your financial future. If your money doesn't grow, you may face the risk of not achieving your long-term goals – like sending a child to college or retiring from your job.
The following graph illustrates the potential difference between saving and investing. It shows how the same contributions over the same amount of time can grow to a much larger amount when earning a higher return.
Source: Edward Jones. Assumes saving $550 per month rounded to the nearest $5,000. Example is for illustration purposes only and does not reflect the performance of a specific investment.
This example shows that the difference between a 3% and 7% return could be nearly $600,000.
Investing takes some homework. That’s why many investors seek professional guidance.
- You should buy and sell often.
Being patient can be difficult. But trust us on this: Jumping on the bandwagon of the latest investment fad and selling every time the market drops probably won’t get you to your goals.
We believe in quality investments, not fads. We believe a financial strategy should be created for market ups and downs. And when the markets are volatile, Edward Jones can help you put these events into perspective.
- You’re too young or too old.
The sooner, the better – but it's never too late. Obviously, starting early is a good idea, because your money has more time to grow. But it’s really never too late to start investing.
In fact, if you’re over age 50, you may be eligible to make catch-up contributions to an Individual Retirement Account or 401(k). And, if you're closer to retirement age, you’ll want a financial strategy to help ensure your money lasts. Lastly, when the time comes, all of us should plan for where our money will go when we’re gone.