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While it wouldn’t make a really good episode of the Mythbusters television show, there are myths that are prominent in the financial world that need to be debunked. Here are some of the myths that Kiplinger compiled:

Myth number 1: There is a hot market somewhere in the world. There is an idea out there that other bits of the world will grow at huge rates even when the economies of the United States or Europe have begun to fall. There is an idea out there that you can offset losses in your home country by investing abroad.

The Truth: These days, thanks to globalization, downturns in any economy can lead to downturns everywhere. No country is immune anymore.

Myth number 2: Real estate is independent and behaves differently than other types of investments. In the most recent real estate craze, many people called it a bubble instead of a boom.

The truth: Real estate will not overcome other risks when credit problems are hurting investments all across the board. Real estate cannot and is not immune.

Myth number 3: The businesses that pay reliable dividends are safer than other investments and are preferred over stocks that do not pay dividends. There are some companies out there who are counted on to increase dividend payouts regularly and, therefore, actually performed better than other stocks.

The truth: Some companies are still increasing dividends. The best way to make sure that a company is going to have stable dividends, look at the cash flow and not just how big the company is.

Myth number 4: Foreign creditors can take out the U.S. Treasury because they own $3.1 trillion of our Treasury debt.

The truth: While it is true that many foreign creditors have a lot of the United States’ debt. It is also true that the U.S. Treasury is the place to go if you want bonds that are extremely safe. That’s why in school, they teach that the rate the Treasury sets bonds at is the risk free rate.

Myth number 5: Gold is where you should put your money in a bad economy. It is now trading above $1,000. However, it has been swinging back and forth with its price over the duration of the recession. Gold seems to be in its own bubble where it does things independent of the rest of the market.

The Truth: Gold is one of the commodities that also rallies in good times. When there is credit for buyers, inflation, and buyers who actually want to go out and spend their money, gold tends to increase a bit then too. It’s not just during bad times.

Kiplinger has five more myths to debunk at their site. I’ve linked to it below.

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Jeremy

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