10 Investing Myths that Could Cost You

There are many investment myths that can lead you to make costly mistakes if you believe in them

Chris Menon 2 May, 2013 | 6:00AM
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There are many investment myths that can lead you to make costly mistakes if you believe in them. Here we outline ten of the most dangerous. 

Diversify as much as you can
Diversification is claimed to be a crucial means of reducing portfolio risk, as we are constantly told not to “put all our eggs in one basket.” However, little is generally said about the dangers of over-diversification. If you diversify too much you risk having a portfolio comprising of too many securities (say, much more than 20). The risk here is that with so many securities to keep track of, you’re unlikely to know them all thoroughly. Investing in something you don’t fully understand can be even more dangerous than holding an inadequately diversified portfolio.

You can’t beat the market
By definition, a majority of investors can’t beat the market. However, a select group of value investors have consistently beaten the market by buying cheap and safe stocks. These include Warren Buffett and Walter Schloss. 

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Chris Menon  is a financial journalist writing for Morningstar.co.uk.