A few investments myths debunked

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 A few investments myths debunked
There are no set formulas when it comes to investment. You can have different investment gurus, suggesting different things, which may not necessarily work. Here are a few investment myths that will always remain myths.

You always make money in shares investing in the long term

This is hardly true nowadays in a dynamic environment. Companies prospects are determined largely by the regulatory environment. Telecom, pharma and steel companies have seen their fate often change because of regulatory hurdles.

There are many aviation companies that have gone bust and you never hear of the older Indian automobile companies of the yesteryears. The list is so large, that you can easily debunk the long term investing story.

Diversification in a basket of shares helps

If a year back, you never diversified your shareholdings and put all your money in pharma company shares, you would have made more money today, then diversifying into other sectors like automobiles, telecom, steel etc. In the last one year only pharma, IT and FMCG stocks have given decent returns. There is no fixed ruled for stock market investments.

Gold investment is a hedge against inflation

This theory again needs to be debunked. In the last one year gold has given investors a negative return of almost 10%, while CPI inflation is running at close to 10%. The fact is that gold will rally when there is geo-political and economic chaos around the world.

In the last 5 years after the Lehman Brothers crisis, gold rallied because of the global economic chaos. With the global economy now recovering, gold has fallen and stocks have rallied

Fixed deposits are safe

This is a myth. A lot of investors have lost money in company fixed deposits and recently a leading political magazine carried a story on how investors had lost a lot of money in company fixed deposits.

Clearly, there is no fixed set of rules for investment. So do not be naïve, if you get tips and tips and more tips from investment gurus.


Story first published: Wednesday, October 16, 2013, 9:41 [IST]
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