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5 Investment Myths That People Blindly Believe In

By SiliconIndia   |   Monday, July 28, 2014
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BANGALORE: With investment markets becoming increasingly complex in nature it leads many to adopt simple rules of thumb often based on common sense while making investment decisions. Unfortunately, though, the forward-looking nature of investment markets means such approaches often cause investors to miss out on opportunities at best or lose money at worst.

It is true that everyone makes mistakes but not everyone has to believe something just because they have been told it is true. There are some very common market myths that investors should be aware of when it comes to building their portfolio.

Here are the five investment myths busted:

1. Rising unemployment means growth can't recover.

Whenever there is a downturn or recession comes in this is the first myth that pops up. But do you think it is true? If it were true then economies would never recover from recessions or slowdowns. But they do. Rather, the increase to household spending power from lower mortgage rates and any tax cuts or stimulus payments during recessions eventually offsets the fear of unemployment for those still employed. As a result they start to spend more, which the economy gets going again.

In fact, it is normal for unemployment to keep rising during the initial phases of an economic recovery as businesses are slow to start employing again, fearing the recovery won't last. Since share markets lead economic recoveries, the peak in unemployment usually comes after shares bottom.

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