Commonly, new investors mistakenly believe that to earn money, they should select which type of stocks?

New investors often believe that to earn money, they must choose individual stocks because they think investing in specific companies will yield the highest returns. This belief stems from the allure of potentially significant gains from picking a single stock that performs exceptionally well. The idea is that by selecting the right company, an investor can maximize their investment returns.

However, this approach can be risky and requires considerable research, market knowledge, and a keen understanding of various factors that influence stock prices. Many first-time investors may overestimate their ability to predict which individual stocks will rise. Additionally, focusing solely on individual stocks can lead to a less diversified portfolio, increasing the potential for loss if those stocks underperform.

In contrast, growth stocks, dividend stocks, and funds represent more strategic approaches to investing. Growth stocks may offer potential for price appreciation but can be volatile, while dividend stocks provide regular income. Funds, such as mutual or index funds, allow for diversification by pooling resources to invest in a broad range of assets, which can mitigate risks associated with investing in individual stocks.