The stock market has more myths than ancient Greece. We’ll use research and facts to debunk the 6 most common ones.

1. BUY LOW, SELL HIGH

Myth: The buy low idea suggests that the best time to buy a stock is after it’s fallen a great deal.

Fact: Research shows that many of the greatest stocks of all time have signaled their best buy points when trading near their highest price at the time. From those points, they seldom dipped much but continued higher above their “already-high” buy point.

2. BUY THE DIPS

Fact: Too often that’s not the case. A falling stock often continues its descent, with sellers joining the move for the exit with each tick lower. And when you buy the dips, often you’ll end up joining those sellers––at a lower price and a loss! Buy stocks that are moving higher, especially on rising volume. Rising stocks tend to attract more investors, providing a cushion for your buy point.

3. BUY THE DIPS

Myth: A stock that traded at $10 a share yesterday is a deal at $9 today.

Fact: Too often that’s not the case. A falling stock often continues its descent, with sellers joining the move for the exit with each tick lower. And when you buy the dips, often you’ll end up joining those sellers––at a lower price and a loss! Buy stocks that are moving higher, especially on rising volume. Rising stocks tend to attract more investors, providing a cushion for your buy point.

4. CHEAP STOCKS ARE GREAT FOR BEGINNING INVESTORS

Myth: Many beginning investors think that because they’re starting with a small amount of investment dollars, they can’t buy stocks above a certain price.

If you’re starting with $500 to $2,000 in your account, Adobe stock trading at over $600 a share and Google trading at almost $3,000 a share seem out of reach. You might think buying a few shares of a high-priced company is not a strong investment, while buying dozens or hundreds of shares at $10 or a penny stock is making a statement.

Fact: It’s not the number of shares you buy that counts—it’s percentage gain on your money. And since the average price of stocks leading the market higher is above $32 a share, you’re better off buying fewer shares of quality stocks than a bunch of shares of lower-priced, low-quality stocks.

These days, many brokers and trading platforms allow you to buy fractional shares, which are smaller parts of high-priced stocks. Many online brokers have fractional shares of popular companies like Amazon or Google for as little as $5.

Having a small account shouldn’t stop you from buying a great company when the time is right.

5. STOCK CHARTS DON’T MATTER

Myth: Stock charts have no predictive powers for serious investors when it comes to picking stocks and gauging market trends. Stick to company fundamentals and you’ll be fine.

Fact: Stock charts are valuable tools that help investors see when the market is trending lower or higher as well as the optimum time to buy and sell individual stocks. Remember, fundamentals tell you which stocks to buy, and charts tell you when to buy and sell.

6. YOLO

Myth: You can’t make big money without risking it all. Put most or all of your money into one big trade, and if it pays off, you’ll be rich overnight.

Fact: Nope. Don’t put all your money into a single trade, especially a risky one. This is especially true with volatile trades in options and cryptocurrency.

Don’t expect to make millions overnight. It takes time to build wealth!

Losing it, on the other hand, can happen really fast if you’re making high-risk bets.

Key Points

1. The best stocks rarely go on sale. If a stock is low-priced (less than $10 per share) or falling quickly from its previous high price, that is a red flag.

2. Buy a stock, hold for its price runup then sell it to lock in your gains. Reinvest your profits in new stocks just starting a run.

3. Don’t risk a big chunk of your investing money (or all of it) on a single trade, hoping for a quick home run. This is especially true of volatile assets like options and cryptocurrency.

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