Top 5 Reasons Why People Lose Money in Stock Market

Top 5 Reasons Why People Lose Money in Stock Market

“Stock Market is a Gambling”

You must have heard this statement as it is very common one. You will surprise to know that to some extent this statement is True.

Almost 90% people lose money in Stock Market. Very few people make money in Market.

There are some very common mistakes most of these 95% people do while they put their hard earn money in Stock Market.

Let’s discussed Top 8 Reasons Why most People Lose Money in Stock Market

#1 Looking for Free Tips

We, due to human behaviour do not want to put efforts in searching right stocks before investing. But instead, we get ready to invest in any stock suggested by our friends or relatives or any Expert on Televisions.

This is very common mistake most of people do and lose money in Stock Market.

#2 Averaging Down Wrong Stocks

When we buy a stock and it is flying high, we feel happy. But, we get frustrated once it starts moving downwards. Nobody like correction in a stock he has bought.

Now in correction we try to average it down in hope that it will bounce back one day.

You should be very careful before averaging down a stock. Otherwise, it will block more fund if your decision to average down go wrong.

Also read: When to Average Down a Stock and When not?

#3 Temptation to make Quick Money

Have you ever done Intraday? Most of new beginners in Stock Market, find it easy to make quick money by Intraday Trading.

Intraday Trading for a Beginner is an easy route to lose all his money.

No stock can make you rich overnight in Stock Market. If you are having “Get rich quick” philosophy Stock Market is not a right place for you.

Also read: Why to avoid Intraday?

 

 

 

#4 Lack of Knowledge

Before buying a Mobile Phone or a TV. We look around through different sites, compare features, price and analyse it, whether this will suit our need or not but when it comes to buying Stocks, we just open our trading app and buy any stock because we don’t have proper knowledge How to Start Investing in Stock Market.

Also read: Step by Step Guide to Start Investing in Stock Market

#5 No Proper Financial Planning

This is also a very common issue, especially with the Salaried Class. Now, most of salaried class know the long term benefits of investing in Stock Market. So, either they start investing directly in stocks or use Mutual fund route to invest through SIP.

 

But before starting investment in Stock Market, they miss few common necessary steps such as budgeting, reducing high interest debts, maintaining emergency fund

Also read: Top 6 Steps a Salaried Person should take before Stock Market Investing

Many of us ignore the Importance of Emergency Fund and in case of emergency we go for pre-mature withdrawal of our investments which we have planned for some other goals.

Due to this pre-mature withdrawal, if Market conditions are not in your favour you might book losses on your investment made in stocks and mutual funds.

Bonus (More Reasons of Losing Money)

#6 Wrong Selection of Stocks

Selection of Stocks for investment is also a very important decision. You can do all the efforts and protect your hard earned money before investing it.

Once you have invested in any stock, now you have limited options and its upto stock how it will perform. Returns from Investment totally depends upon how well the stock or the company, behind this stock, is performing.

Also read: How to Select Quality Stocks

#7 No Time for Monitoring

You have limited time and want to invest in Stock Market, so do not go and directly buy stocks. Direct Exposure to Stock Market with limited time can put you on wrong side of table. As selection of stock is important, monitoring the stock performance is also very important.

In this case, it is better to invest through Mutual Funds instead directly buying stocks.

Also read: All about Mutual Funds – Smart Way of Investing

#8 Impatience Behaviour – Speculative Mind

Are you investing just to get 5% or 10% return from Stock Market? Do you keep looking on daily basis whether you stock price is moving upside or downside? Do you want to buy today and sell tomorrow or within a week or in a month?

If even a single statement from above is true for you then you are Speculating in Stock Market and not Investing. Chances of making money always remain very high when you invest and chances of losing money remains very high when you are speculating.

People who invest make money for themselves, People who speculate make money for their Broker

Benjamin Graham

Conclusion

So, we have discussed most of the reasons why people lose money in Stock Market. Before investing in any stock, devote some time, do your own research, only then put your money in any stock and never just buy and forget, keep track on your stock performance.

If you still have any query please comment below.

 

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