Numerous a period while watching the market news you hear the words like ‘Gracious, the market is bullish’, ‘SGX went up 100 focuses’, ‘Clever banks are doing awesome this year’ and so on. At that point, you see your portfolio and converse with yourself ‘Why the damnation am I losing cash?’
Try not to stress. This isn’t only your situation. About 90% of individuals lose cash in the share trading system. Be that as it may, do you know why? Why your portfolio is at a misfortune when the market is upward, why the vast majority of the stocks you purchased are failing to meet expectations; for what reason aren’t you ready to beat the market? On the off chance that you experience every one of these musings, at that point you are one of those 90% individuals.
Along these lines, today I am will give you top 5 reasons why most people lose money in the stock market. Be with me for the following couple of minutes to reveal this secret.
5 Reasons Why Most People Lose Money In Stock Market?
1. Trying to make money quickly
This is the second biggest mistake that people make while investing in the stock market. People are always in a hurry to make money. They always want to become rich quickly. Always want to be like ‘Warren Buffett’ – Rich and Powerful. However, what they don’t understand is that Mr. Warren Buffett has made the majority of his fortune after his 50’s. It’s a fact that he got more than 90 percent of his wealth after the age of 50 and has accumulated a large sum through his long-term investments for a period of over 5 decades. Success in the stock market needs time and patience.
But this is not how the people invest. They enter the market. Then select a stock which they heard on a news channel that ‘It has a huge growth potential’ and they invest heavily in it. Then they pray that their money becomes 5-10 times. However, it turns out that they lost 30-40% of their investment. So, out of frustration, they quit investing in stocks and start searching for another way that can make them rich quickly. This is how the non-achiever in stock market thinks and loses money in the market.
2. Sudden overexposure to market and non-diversification
This happens a lot of time in the stock market. A common person has accumulated a lot of savings over the period. Then he hears how his neighbor has doubled his money by investing in the stock market. Suddenly he also gets interested in the share market. He started thinking that if his neighbor who is a Salesman, can get so many returns from the stock market, then why can’t he? Hence, he decides to enter the stock market with a huge amount of money that he has saved during all those years of hard working.
In addition, non-diversification is also one of the biggest mistakes that most people do. People are so confident about their stocks that they think it’s illogical to invest in multiple stocks which may average out the profits. True, it might average out the profits; but it also reduces the risk. Remember, it’s always about minimizing risk and maximizing the profits. Like over-diversification minimizes the profits, in the same way, non-diversification maximizes the risk.
3. Holding onto losses while booking profits early
Give us a chance to envision a situation. You have purchased 5 shares. Three of them are doing incredible while two of them are failing to meet expectations. What will you do? What will you offer first? The offers that are doing awesome or the person who is overcoming?
‘Offer the champs and hand on to the failure stocks’. Most of the novice financial specialists take after this run the show. They surmise that it’s sheltered to offer the stocks first which are giving them great benefits and hold the failure stocks. Along these lines, the washout stocks will inspire time to recuperate and they may recover their underlying speculation. Additionally, meanwhile, they can get a few benefits by offering their great stocks.
4. Lack of patience
Persistence is the way to achievement in securities exchange. The main thing that you have to do on the stock exchange is to purchase great stocks and give it time. This is the best way to profit here.
Notwithstanding, the vast majority who lose cash in the share trading system don’t have tolerance. Albeit huge numbers of these individuals can locate a decent stock, they aren’t ready to get great benefits from them. Why? Since they don’t have persistence. They can’t allow 2-3 years time to their stocks to develop. They need a snappy outcome.
Be that as it may, this isn’t the main issue with such speculators. In a few circumstances when their stocks lose 20-30% of its value, they turn out to be very anxious and offer their stock rapidly. In the event that just they have held their stocks for two or three months, they could have great returns of around 40-half on their speculations. Here, the absence of persistence fizzles on their knowledge of picking a good stock.
5. Blindly following the crowd
This is the last reason that I want to mention that why people lose money in the stock market. BLINDLY FOLLOWING THE CROWD.
Imagine a scenario. Your neighbor bought a stock which increased its value by 50% in a few days. Then you colleague bought the same stock and the stock has now risen to around 80% appreciation from its initial value. Everyone is talking about that stock and it’s making a lot of noise in the news. What will you do now? All your known people are getting great returns by investing in that stock. Will you invest in that stock too?
What you can do is to read about the company’s fundamentals, its financial reports and figuring out why is it in news so much. And after studying the company completely, if you are satisfied, then only invest in that stock.