Beating the market can be done by two ways either with Superior Information or Luck. Superior Information can be done by two ways either with Data Banks available on a website such as screeners, databases or through Scuttlebutt. If one had to believe that the information available is the key then software companies with all the tools and database would have all been billionaires. Mutual funds which have access to data, information would have beaten the market consistently.
Now there is another school of thoughts that think information is not the key. Luck is what matter. Now for those who think that luck is the most important. They come and try their luck to make a quick buck. Now luck often leads to speculation. Speculation cannot result in consistent returns. in long-term beating the market. Once they have tried their luck now they start believing that information is the key.
Finding superior information is difficult because at some point it would eventually lead to insider information. Now when luck nor information right not able to beat the market. Then my very first sentence is void from the beginning.
Precisely here my argument is none of them independently can beat the market. But in combination, it’s definitely possible. The only information is not so good until we have a little luck and likewise you can’t be lucky without any information.
WHY MOST PEOPLE LOSE MONEY
Lack of Confidence or too much of advice eventually over diversification would lead to underperformance. People with that attitude that something will at least work. And they are right also but results are not visible. For example one of our subscribers asked was kind enough to share his portfolio of 100 stock to me. And to my surprise, he had few multi-baggers returns on few stocks also. But those multi-baggers did not have any impact on his entire portfolio.
Margin Trading or Credit Trading would sound good initially but a single loss can wipe out your entire capital. On expectation that the high-profit potential of any idea or stock or system would eventually lead to over exposure. Exposing more money to the stock market than you have. This is the main reason many people lose money in the stock market.
Your own research alone will make you rich not others. Most people rely on making a quick buck with tips which hardly works most of the time. One secret Tip not to lose money is not to take any Tip.
“If stock market experts were so expert, they would be buying stock, not selling advice”.
-Norman Ralph Augustine
Speculation is synonyms to gamble. Speculation is when one person predicts in the stock market without proper premises of Technical Analysis, Fundamental analysis or Demand & Supply Analysis then it leads to speculation. You can’t be correct all the time with speculation and getting a consistent return is also not possible.
Holding unto losses
The Art Of Cutting Your Losses – Most important lesson hold on to your winner and let the loser go. Fear of losing the profit and hope of covering the loss take all your money away. It can’t be explained simpler than that.
Not Taking advice from Professionals
Certain things are best left for professionals. An operation has to be done urgently for one survival we only go to the doctors who are medical professionals. But when we have weak financial health we ask and expect to get a proper answer from people close to us.
Expectation to Get Rich Quickly
The majority of people come to stock market with an expectation to get rich quickly. What they fail to believe that being patient is also important. Stock market there are no short cuts to success. Its a very hard-working profession which most people fail to understand.
Lack of Research
Lack of self-research before investing and unreliable source of information. Studying or doing some research is one of the most important things even before going to a financial specialist. To understand the financial specialist one has to do some basic research. Even more important to use the right and the most reliable source of information for research.
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Do comment if you have any point to add out of your experience.