Debunking Investing Myths: What Financial Professionals Want You to Know
04 Mar 2025
Investing can be one of the most effective ways to build long-term wealth, yet many people hesitate due to widespread myths and misconceptions. From the belief that investing requires a fortune to the idea that market timing is a reliable strategy, these misunderstandings often prevent individuals from making informed financial decisions.
To set the record straight, we spoke with our experienced financial professionals who shared their insights on the most persistent investment myths—and the truth behind them.
Myth #1: You Need a Lot of Money to Start Investing
One of the biggest barriers to investing is the belief that you must have significant wealth to begin. According to Brock Renner, Wealth Manager, this simply isn’t true.
“People always think that you have to have a lot of money to start investing. I had a client start investing $50 per month 30 years ago. Over time, as she got raises, we increased her monthly savings rate. Now, 30 years later, she is retiring with confidence,” says Renner.
This illustrates the power of compound interest—even small, consistent investments can grow significantly over time. Starting to invest early is one of the most powerful financial decisions a person can make. Investing early also provides a longer time horizon to weather market fluctuations. The stock market experiences short-term volatility, but historically, it trends upward over long periods. A longer time frame allows for more strategic asset allocation, balancing risk and reward according to personal goals and life stages. Beyond compounding and taking advantage of time in the market, beginning early fosters financial discipline and a mindset geared toward wealth-building.
Myth #2: Retirement Planning Ends When You Retire
Many people believe that once they reach retirement, their financial planning days are over. However, Scott Klahn, Wealth Advisor, warns that this mindset can be risky.
“Retirement planning doesn’t end when you reach your retirement date. It’s possible retirement could last a long time,” Klahn explains.
With life expectancy rising—the average American who reaches age 65 can expect to live another 20 years—it’s crucial to manage retirement assets wisely to manage longevity risk throughout retirement. This means continuing to adjust investment strategies, managing withdrawals, and accounting for healthcare costs.
Myth #3: Market Timing Works
A common mistake among investors is the belief that they can predict market movements and time their investments accordingly. Ron Pfeiffer, Wealth Manager, debunks this myth:
“Getting in and out of the market as it fluctuates is not a good strategy. Most people wind up getting in and out at the wrong times, buying at the highs and selling at the lows.”
Similarly, Elias Randel, Vice President, adds: “Timing the market is impossible. You have to be right twice – when you get in, and when you get out. If it were easy, everyone would do it.”
Historical data supports their claim. A study from JP Morgan Asset Management found that missing just the 10 best days in the market over a 20-year period could reduce an investor’s return by more than 50%.
Instead of market timing, consider a long-term approach with investments that align with your goals and objectives. This allows investors to ride out market volatility and benefit from overall market growth.
Myth #4: Some Investment Firms Offer Better Returns
A common myth is that switching investment firms will yield better returns. Roger Abel, President, clarifies why this isn’t the case:
“The biggest myth is that investment returns at other firms are different. Advisors, for the most part, have access to the same investments. Your returns will be determined by the asset allocation. XYZ investments has the same return at Firm A and Firm B.”
This underscores the importance of asset allocation over stock-picking or switching firms. According to a study by Brinson, Hood, and Beebower, over 90% of a portfolio’s long-term performance is determined by asset allocation, not individual security selection.
Myth #5: Annuities Are Always a Bad Investment
Annuities often get a bad reputation, but Chris McNeal, Regional Vice President, argues that they can be a valuable tool when used correctly:
“Annuities aren’t for everyone, but they can be good investment vehicles for retirement. The key is making sure they fit in the context of your overall goals, time horizon, and risk tolerance.”
While some annuities come with high fees and restrictions, others offer guaranteed income for life, tax-deferred growth, and protection against market downturns. Understanding an investment and why it makes sense in the context of your financial plan is important. There is no magic ‘one-size-fits-all’ product to solve all of your problems, so do your research, consult your financial plan, and ask questions before making any investment decision.
Myth #6: Investing is Easy Money
The idea that investing is an easy way to get rich is misleading. Jonas Everett, Wealth Advisor, warns:
“Making gains on your investments is not easy. People get caught up chasing the next hot investment, because they think that is what will make them rich. But meaningful wealth is built over time through financial planning and carefully crafted strategies.”
Successful investing requires patience, discipline, and strategy. While stories of investors making quick fortunes circulate, the reality is that sustainable wealth-building takes time.
Research from Dalbar Inc. shows that the average investor consistently underperforms the market because of emotional decision-making. Between 2002 and 2022, the S&P 500 had an average annual return of about 9.4%, yet the average investor earned only 5.0%, largely due to mistimed buying and selling.
Instead of looking for shortcuts, focus on long-term growth, diversification, and financial education.
The Bottom Line: Smart Investing is About Strategy, Not Myths
Investment myths can be costly, leading to missed opportunities or poor financial decisions. Starting small, maintaining a long-term perspective, and focusing on asset allocation are key to building wealth.
By debunking these myths, investors can make more informed choices allowing their financial future is guided by facts, not fiction.
Important Information:
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Asset allocation does not ensure a profit or protect against a loss.
All investing involves risk including the possible loss of principal. No strategy assures success or protects against loss.
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Indexes are unmanaged and cannot be invested in directly.
Annuities are sold by prospectus, which contains detailed information about investment objectives and risks, as well as charges and expenses. You are encouraged to read the prospectus carefully before you invest or send money to buy an annuity contract. The prospectus is available from the insurance company or from your financial professional. The guarantees of an annuity contract depend on the issuing company’s claims-paying ability.
Studies/Sources Referenced:
- Dalbar QAIB 2024: https://www.dalbar.com/Portals/dalbar/Cache/News/PressReleases/QAIB2024_PR.pdf
- Gary P. Brinson, CFA, Randolph Hood, and Gilbert L. Beebower, “Determinents of Portfolio Performance” https://www.jstor.org/stable/4478947
- J.P. Morgan Asset Management Guide to Retirement https://am.jpmorgan.com/us/en/asset-management/institutional/insights/retirement-insights/guide-to-retirement/
