Myth #1: Stock Market is a form of gambling

In gambling, every dollar won is a dollar lost by someone else. It must be this way because gambling produces nothing, creates nothing, and therefore can only return to a winner what it took from a loser. The value of common stocks increases without taking wealth away from anyone; in fact when the stock prices increase, the amount of aggregate wealth increases for society as a whole. This is because common stock holders do produce something; They postpone the comsumption of goods (ie, they save some portion of their income) in order to supply the seed capital needed to buy production equipment and produce goods.

Gambling transfers wealth from a winner to a loser because it produces nothing. Investing increases overall wealth because the capital invested in stocks provides the initial funding for firms which exist for the purpose to producing goods and services.

The value of stocks trends steadily upward over time. They do not seesaw back and forth in the same range forever. In the aggregate, stock investors demand and receive a return that is substansial and permanent.

Myth #2: Stock Market Prediction are the key to Successful Investing

Why do people assume this? For some, it is because they do not understand that stocks give a positive and substantial return over time - they falsely assume that stocks bounce around in the same range forever, and they therefore conclude they must predict movements in order to be able to sell at the top of the range and buy at the bottom of the range. For others, the desire to predict is borne out of human nature, which puts a premium on certainty. We love to know what will happen in advance. Hence, it is usually assumed by the beginning investor that to be successful, one must first become an expert at forecasting future market trends. Experienced investors know, in fact, that nothing could be further from the truth.

In the long run, a good investment strategy that doesn't rely on prediction will beat a market forecasting strategy.

Myth #3: What goes up must come down

Just because a stock has had a large increase in price does not mean it cannot increase further. Stocks which are hitting new highs often continue making additional new highs in price.

Myth #4: What goes down must come back up; or Buy Low, Sell High

If you're to succeed in the stock market, you simply must eradicate from your mind the appeal of buying declining stocks!