5 investing myths that could be holding you back

Investors today have smarter tools, greater access and fewer barriers than ever before. Yet some long-held beliefs still shape how we approach the market. And, whether inherited or shaped by experience, these assumptions can quietly limit how we build wealth.

Here are five of the most common investing myths, and why they no longer hold up in today’s environment.

1. You need a fortune to start investing

Investing has long carried the perception that it’s only for the wealthy. But today, thanks to fractional investing and products like ETFs, it has never been easier to build a portfolio and work towards long-term wealth goals.

For example, on Betashares Direct, you can invest brokerage-free in ASX-traded ETFs and 300+ shares. You can also invest the exact amount you want (e.g. deposit $500, invest $500) when you place a market order. Similarly, distributions and dividends can be reinvested in part or in full, with no cash component left sitting uninvested.

2. Holding cash is the safest default

Cash often seems like a safe harbour, especially when term deposit rates are high. But interest rates don’t stay high forever and today’s cash returns may not stick around.

That doesn’t mean cash has no role. It’s essential for short-term needs and emergencies. But for long-term goals like financial independence or maintaining a standard of living, investing is typically much more effective.

Nowhere is this more apparent than in the following chart, which showcases the returns of cash and equities versus inflation. Cash steadily loses purchasing power over time, which also challenges the idea that it’s risk-free. Shares, by contrast, have delivered significantly stronger returns over the past 20 years.

Source: Cutcher & Neale Accounting and Financial Services. Published May 2024. Past performance is not an indicator of future performance.

Leaving too much on the sidelines for too long can mean missing out on the growth you can achieve.

3. You need to know more before taking action

Some people feel they need deep expertise before getting started while others think they have to follow markets closely in order to make informed decisions. But striving for perfect knowledge can also lead to inaction.

While all investments carry risk and require consideration of personal circumstances, there are ways to access diversified exposure without constructing a portfolio from scratch.

For example, ETFs offer exposure to a broad range of assets or markets in a single trade. Similarly, Betashares Managed Portfolios are low-cost, diversified portfolios constructed by investing experts from ASX-traded ETFs. Both solutions can help build good investing habits into an investing strategy.

These options can offer structure and simplicity, allowing investors to stay focused on long-term goals without needing to actively manage every decision.

4. It’s better to wait for the right time

Market timing is tempting and, when investors get the timing right, the payoff can be enormous. But the reality is it’s also not easily achievable.

A J.P. Morgan study found that seven of the stock market’s 10 best days over the past 20 years occurred within just 15 days of the 10 worst days¹. Investors who missed those 10 best days saw an average annual return of 6.4%, compared to 10.6% for those who stayed fully invested.

Source: J.P. Morgan

The takeaway? Trying to time the market can backfire – and investors who stayed the course through downturns, like the GFC or COVID sell-offs, generally fared better than those who exited and re-entered later.

That’s where dollar-cost averaging can help.

With Betashares Direct’s Auto-invest feature, you can set up recurring investments into up to five Betashares ETFs. It’s an easy way to automate your investing and stay focused on your long-term goals, without the pressure of picking the perfect time to invest.

5. Investing is something you do later in life

Some people treat investing as a second-stage priority. That is, it’s something to focus on once the mortgage is under control or life feels more settled.

But time is one of the most powerful tools in long-term investing. The longer your money stays invested, the more it tends to benefit from compounding. Put another way, your returns could generate their own returns.

Betashares’ analysis shows that a single $5,000 investment growing at 7% annually and compounded monthly could grow to over $80,000 after 40 years – even without additional contributions². Importantly, half of that growth comes in the last ten years of the 40-year horizon. It’s a reminder that starting early can be as crucial an indicator as how much you invest, even if the compounding takes a while to kick in.

Source: Moneysmart.gov.au; assumes a 7% growth rate compounded monthly on a $5,000 initial deposit with no further contributions. For illustrative purposes only.

The bottom line

The way we invest has changed. Fees are lower, access is broader and tools are smarter. Yet many investors still hold back because they’ve inherited assumptions that no longer apply.

Investing today doesn’t require perfect timing, large sums or deep expertise. It requires clarity, consistency and a willingness to start, even when conditions don’t feel perfect.

The first step doesn’t have to be big. It just has to be taken.