People have many false misconceptions about investing. They read or hear something and assume it is true without any research. Others rely too much on research and suffer from information overload or “analysis paralysis.” Some common misconceptions:
1. Diversifying means buying lots and lots of investments.
2. I should always try to beat the markets.
3. I should never take risk.
When it comes to money, most people play it safe. They want to feel secure. They settle for mediocrity instead of excellence. Passion doesn’t direct; fear does. They let their emotions control their destiny. Fear keeps people in the same type of job, earning the same type of pay. The pay progresses upward but so does the fear–there is now more to lose. The job is only a short-term solution to a long-term problem. They refuse to take any risk and seek better opportunities. If you master the power of money, you will not be afraid of change and will be able to take more risks. Who do you think is more likely to pursue his dreams and take a risk: the man with a million dollars in the bank or the guy living paycheck to paycheck?
Play the game to win, not to avoid losing. The greatest things in life are worth a risk: the risks of telling her you love her without knowing if you will hear it back; the risk of taking a new job opportunity not knowing if it will be beneficial in the long-run; the risk of saving for retirement not knowing if you will ever get there. Financial risks appear to be a huge leap of faith. The biggest risks are the ones you never take. If you do not take a chance once in a while, you may never lose, but you will rarely win. Take chances. Know the stakes. Know the worst thing that could happen as a result of your decisions and take calculated risks.