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Dont believe these stock market myths




IT IS surprising how often “conventional wisdom” does not meet either criteria — it does not follow convention, nor is it wise.

From predicting the winner of next years Super Bowl to predicting next weeks stock market, conventional wisdom can lead you astray.

Lets explore some of the myths related to the latter subject. (You can work out Super Bowl myths separately.)

HIGHER RETURNS REQUIRE MORE RISK

This statement assumes risk equals price volatility, which is only one part of risk. Understanding and managing that volatility is key to success. Rather than focusing on the volatility, focus on the reasons behind the current price and how that compares to the fundamentals of the company.

Warren Buffett is not a daredevil he is simply better at spotting bargains than anyone else. You will find many boring yet solid companies in his portfolio.

THE STOCK MARKET IS A FORM OF GAMBLING

To those who rely on random guesswork, the market can appear to be gambling. Research and in-depth understanding are important for success in both fields.

However, the stock market involves overall wealth creation. Gambling is zero-sum since all gains come from others losses. In the stock market, losses involve the merits of an individual company and its spot within the marketplace, not someone elses positive outcome.

Overall, wealth is created without coming solely at the expense of others. (Save the political conjectures for another time.)

STOCKS THAT GO UP MUST COME DOWN, AND VICE-VERSA

The key to knowing when to buy an underpriced stock and dump an overpriced one is correctly assessing the companys growth potential and fundamentals. Buying simply on name and price assuming that the stock will rise again is foolish.

Prices are where they are for a reason, and that reason is not always rational. Do your research on the reason for the unusual price, and act based on your findings, not on a price trigger.

YOU CANNOT TIME THE MARKET

This depends on the definition of timing the market. For most of us, chasing hot tips or market buzz is futile. There are a few extremely skilled investors that have the knowledge and resources to do well and successfully time the market often enough to succeed. Like successful gamblers, they only bet when they are very sure they can win.

Being an average investor, you probably lack the skill and resources and therefore cannot time the market. You are better off assuming this myth is true unless you use it to justify buying into the stock market at any time, assuming that timing plays no role at all. You still need to exercise good judgment and buy when prices are reasonable and growth is expected to continue.

STOCKS OUTPERFORM OTHER INVESTMENTS OVER THE LONG-TERM

This is often true, but the question is how long-term is defined, and where the reference points are. If you accept this statement as a reason to stick with stocks overall (not just any one particular stock) over the long course of your investing career, then this is reasonable.

If you use this as a reason to stay 100% invested in stocks when you are nearing retirement age instead of shifting some assets into other investments, a longer-term recovery is of no use to you.

All of these myths have some elements of truth to them, which is why they endure. However, people make poor decisions when these myths are applied incorrectly or universally. Do not be one of those people who allow a myth to guide them to a regrettable investing decision.

More from MoneyTips.com:

Dollar Cost Averaging 101

Contrarian Investing 101

Investment Return 101

This article originally appeared on Fox News and was reproduced with permission.

Elite parents skipping the childcare queue while promised reforms stall


IT’S ONE of the most frustrating tasks facing any working parent: getting your kid a spot in childcare.

Parents are forking out application fees of up to $100 each to put their childrens names down at multiple centres in inner city areas with many being waitlisted at birth.

But not everyone has to wait in line, with Australias childcare market increasingly becoming a tale of two cities.

Lawyers, accountants and financial advisers working in buildings owned by Australias biggest office landlord are being ushered into the VIP express lane when they apply for a spot with Guardian Early Learning Group.

Its part of a new deal between the childcare provider and Dexus Property Group, which manages 1.8 million square metres of office space across 57 buildings across the country.

In an Australian first, the partnership gives Dexus tenants employees priority access to Guardians 90 centres, allowing them to skip the queue.

Executive general manager Deborah Coakley said the idea had arisen from conversations with corporate clients in capital cities.

We asked them what are the business pains you have? And it was the ability for people to return to work productively and gain access to childcare, Ms Coakley said.

A month in she said, the initiative had been embraced by workers and was running smoothly.

Weve had a large number of placements already made and number of applications growing week on week, she said.

A single application fee is paid, instead of multiple waitlist fees, and parents are charged the same rate as for any other child (about $120 a day).

BITTERSWEET CIRCUMSTANCE

The Parenthood executive director Jo Briskey said the news of corporate childcare programs like the Dexus partnership was bittersweet against the backdrop of ordinary parents struggle. It comes as the Turnbull Governments promised childcare reforms have stalled in Parliament.

While she welcomed employer initiatives to create family-friendly workplaces, and help women maintain their careers, it is very hard in the context of the crisis that we have here in Australia at the moment in terms of the affordability and accessibility of childcare across the board, Ms Briskey told news.com.au.

Weve been waiting too long for the government to do something about the crisis that were facing at the moment of affordability and accessibility of childcare, especially in major cities like Sydney and Melbourne. Its a bit of a bittersweet circumstances.

Families learned earlier this month that they will have to wait at least another year for the new streamlined childcare support, with parts of the governments $40 billion families package deferred until July 2018.

The reforms include a single, means-tested subsidy that will cost $23 billion and be awarded based on an hourly fee capped at $110 a day, with families on less than $65,000 receiving up to 85 per cent of the cost of care.

Treasurer Scott Morrison told blamed the delay to the child care reforms which were a major plank of the 2015 budgets families package to the Senate not passing changes to the family tax benefit.

But Ms Briskey rejected the absurd notion that the only way the government can afford its childcare reform package is by getting significant cuts to family payments through the Parliament, arguing that the government had already made the necessary savings to bankroll the scheme.

We have been waiting for years for reform, she said, urging the government to just get on with it.