Investing myths dispelled

Investing myths dispelled


KNOXVILLE (WATE) - Certified Financial Planner John Fawaz says there are several myths commonly believed about investing that are simply not true.

The first myth is that stocks are not worth the risk. However, Fawaz says over the long term, stocks outperform other types of investments.

When one invests for only one year, the risk of losing money stands around 24 percent. After five years, the risk goes down to 15 percent, and to 5 percent after 10 years.

The second myth: bonds are not for conservative investors. Fawaz says this is not true, and bonds can play a role in any portfolio.

He says there are all sorts of bonds. Some are very conservative, and some are very risky like high yield or junk bonds.

The biggest two risks with bonds are default, when a company goes out of business, and interest rates.

There is an inverse relationship between interest rates and bonds, according to Fawaz. When interest rates go up, bonds go down. That explains why bonds, especially mutual funds, are risky investments at the current time. Interest rates are presently very low.

Finally, Fawaz says some people feel that investing is complicated and they don't have time to think about it. In reality though, procrastination can cost money. The earlier one invests, the more time the investment has to grow.

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