Can investing in stocks truly lead to financial freedom? These 4 drawbacks, 90% of people have fallen into the trap

Many people hear that saving stocks can help them retire early and earn stable income, so they start treating stocks like fixed deposits and gradually accumulate returns. This sounds very tempting—no need to watch the market every day, no advanced technical analysis skills required, and you can make money. But the reality is, saving stocks is not as magical as online hype suggests.

How many people have blindly saved stocks, only to earn dividends but lose their principal? How many have needed money urgently and been forced to sell at a low point, losing everything? These are not isolated cases.

Why Saving Stocks Is Not as Easy as It Seems?

Saving stocks sounds simple: buy quality stocks and hold them long-term, waiting to receive dividends each year. But behind this “passive income,” there are four deadly flaws.

Flaw 1: No Principal Guarantee; Earning Dividends Often Means Losing Price

This is the point many overlook. Saving stocks does not equal saving money. Bank fixed deposits come with capital protection guarantees, but saving stocks do not.

Real cases happen around us. In 2021, a popular stock (3373) announced a dividend of 10 yuan, with a yield over 15%, attracting many investors. The stock price, however, fell from 70 yuan to 22 yuan. The final result? They earned some dividends but lost a large portion of their principal. This is a typical “receiving dividends while losing capital” scenario.

So, saving stocks does not guarantee profit without risk. This must be clearly understood.

Flaw 2: Most Prone to Pitfalls When Urgently Needed Money, Forced to Lock in at Low Points

Saving stocks requires long-term holding, but life always has surprises. If you suddenly need money just before a dividend payout, the most awkward situation occurs—stock prices might be at a low point.

You face a tough choice: sell and risk losing dividends and capital; or not sell and lack cash in the short term. Once caught in this dilemma, you can only hold on and wait for a rebound.

This is why saving stocks should only be done with idle funds—money that won’t be needed in the short term. If your living funds are tight, it’s better not to put all your money into saving stocks.

Flaw 3: Stock Selection Is Seriously Underestimated

Because the daily work of saving stocks is simple (just buy regularly), the initial stock selection becomes especially important. If you choose well, you can receive stable income over ten years; if you choose poorly, you might suffer losses for a decade.

Many people only look at high dividend yields and rush in, ignoring factors like industry prosperity, company competitiveness, and valuation levels. It’s like only looking at surface interest rates and saving money at a “problematic bank.”

Stock selection is not a numbers game; it’s about truly understanding what the company does, why it can continue paying dividends, and whether it can sustain dividend payments in the future. This is quite challenging for beginners.

Flaw 4: Little Short-term High Returns; Requires Strong Patience

The advantage of saving stocks is in the long run. But if you expect to double your money in three or five years, you’ll be disappointed. Short-term market fluctuations and investor sentiment can easily shake your confidence.

Watching others make quick profits from short-term trading, while your saving stocks account remains stagnant, can be very discouraging. Saving stocks requires patience of ten years or more; for those seeking quick gains, it’s very hard to stick with.

Who Are Truly Suitable for Saving Stocks?

Saving stocks is not a universal investment method; it only suits certain groups. If you belong to the following categories, saving stocks is a reasonable choice:

People with idle funds: Able to regularly set aside money that won’t be needed in the short term for investment, avoiding forced liquidation due to urgent needs.

People with strong psychological resilience: Able to tolerate market fluctuations, not easily frightened by short-term declines, and not quick to cut losses due to market sentiment.

People with lower risk tolerance: Prefer stable dividend income and long-term appreciation over high-risk, high-return pursuits, and can accept the volatility of saving stocks.

People with fundamental analysis skills: Capable of independently evaluating a company’s performance, competitive advantages, and long-term potential, rather than making decisions based solely on surface data.

People with a long-term investment mindset: Truly understand the meaning of “long-term,” willing to let time and compound interest work, and not easily tempted by short-term gains.

If you do not meet these conditions, blindly following the trend of saving stocks may turn you into a market “chives” (retail investors who get squeezed).

How to Choose Saving Stocks to Avoid Pitfalls?

If you confirm that saving stocks suits you, selecting the right targets becomes crucial. The following three categories are relatively safer choices:

Financial stocks: Stable and relatively high dividends, strong company strength, but you need to pick the right entry point—prices are not always cheap.

Industry leaders: Stable operations, ample cash flow, capable of continuous dividends. If you want both dividends and capital gains, choosing industry leaders is a good approach.

ETFs: A basket of stocks, best for risk diversification, especially suitable for beginners. ETFs like Yuanta High Dividend (0056) and Yuanta Taiwan 50 (0050) are popular among saving stock enthusiasts.

How to Minimize the Risks of Saving Stocks?

Step 1: Carefully select targets instead of blindly following trends

For beginners, strongly recommend starting with ETFs. After familiarizing yourself with the market, gradually choose individual stocks, focusing on industries and companies you understand. Don’t buy stocks just because others say they are good—that’s the easiest way to get trapped.

Step 2: Manage funds categorically and plan for long-term and short-term

Divide your money into two parts: long-term saving stock funds and short-term living funds. Never put all your assets into saving stocks; otherwise, urgent needs may force you to sell at a loss.

Step 3: Choose reputable platforms and compare transaction costs

The choice of investment platform is also important. Platforms should be compliant and reliable, with transparent transaction fees. Although the cost difference may seem small, over the long term, it can make a significant difference due to compound growth.

Final Words

Saving stocks is not the only path to wealth freedom, nor is it a 100% guaranteed investment method. It is just one of many investment tools, suitable for specific people and stages.

Young people aiming for wealth should not rely solely on saving stocks. Learning to diversify investments and choosing suitable methods based on your situation is the right way to start investing. Blindly following the trend of saving stocks will most likely turn you into a market “chives.”

The key is to recognize the flaws and risks of saving stocks, rationally assess whether you are truly suited for this approach, and then make your decision. Only then can you avoid being deceived by online “monthly income of ten thousand” motivational articles.