One of the most powerful money making tools and opportunity is stock market. There are a lot of people who quickly get into the stock market to make money not realizing what it requires you to succeed in the stock market. Also, there are as many people to fail in the stock market within a year and losing a lot more money than expected to gain from investing in the stock market. There are few things in the stock market that experience will teach you perhaps others are better learned from others mistake. Learning everything from the stock market through experience is a costly affair.
Getting started is easier than ever. You just have to decide that you would like to invest in the stock market and all the stockbrokers would be at your doorstep to open an account for you. With the recent rise of zero brokerage, it has becomes even easier.
It doesn’t matter what study or analysis you are using to invest in the stock market be in fundamental analysis or even technical analysis these rules are going to apply. Also, if you are research very forms of decision making such as demand and supply analysis still same rules apply.
Many talk about the risk of investing but no one discusses the risk of not investing. My question to them is, has anyone becomes rich by investing in fixed deposit or is there a better way to beat the inflation?
Below are the points which I was not told when I started investing in the stock market.
- 1 Reasons Why Most Investors Fail in the Stock Market
- 1.1 Not Having a Guru or Mentor
- 1.2 Lack Patience
- 1.3 Afraid To Fail
- 1.4 Emotions Overshadow Judgement
- 1.5 Investing in Stock Rather than Business
- 1.6 Following Herd Mentality
- 1.7 Not Following Disciplined Approach
- 1.8 Treating Stock Market as Money Making Machine
- 1.9 Not Being A Student of the Stock Market
- 1.10 Over To You
Reasons Why Most Investors Fail in the Stock Market
To stay put in the stock market all through the ups and downs is a matter of a great deal. Even the most successful and wealthy stock investors and traders have lost a fortune when they are at the top.
Let me take you through the finer points and we are always open to discuss other points in the comment section.
“The man who begins to speculate in stocks with the intention of making a fortune usually goes broke, whereas the man who trades with a view of getting good interest on his money sometimes gets rich.” Charles Henry Dow
Not Having a Guru or Mentor
No matter how many books you read or how successful you become you cannot replace a guru place with anything. One of the most popular fact in the stock market, ” Benjamin Graham, while best known as Warren Buffett’s mentor, was a legendary investor in his own right.”
Did you know: Mohnish Pabrai — who runs a U.S.-based investment fund. How much did he forked out for the privilege of dining with Warren Buffett on June 25? The answer is $650,100.
It doesn’t matter how big or a small investor you are, mentor plays it’s role irrespectively.
Stock Market = Money Making Machine
If you are among those who treat the stock market as an only money making machine and nothing else then this one is for you. In a hustle to make money fast you putting your hard earned money to fail.
One of my favorite Buffett quotes is, “The stock market is a device for transferring money from the impatient to the patient.”
Afraid To Fail
Much first-time investor starts investing in the stock market with the mindset of fixed deposit. If you are investing in fixed deposit the return is low becuase the risk you are taking in the stock market is low. Likewise, the return in the stock market is high since you are taking higher risk in the stock market.
There are at times when you could lose even the principal amount while investing in the stock market. It could be any route mutual fund, debt fund, investing or trading.
With proper Risk Management and Money Management, one could make money in the stock market even after making a few losses.
Hence we at AlphaTrading believe in the concept of – “Affordable Economical Losses”
Emotions Overshadow Judgement
Investor and especially traders get very emotional towards their decisions and holding in the stock market.
“Ultimately, consistent profitability comes down to choosing between the discomforts you feel when you follow your plan and the urge to let yourself be captures ( and ruled) by your emotions.” ― Yvan Byeajee, The essence of trading psychology in one skill.
This works another way around also when you fear that you are not going to get the stock at this price and start investing like there is no tomorrow. This phenomenon is called Fear Of Missing Out(FOMO).
Investing in Stock Rather than Business
Investors who follow the Three Pillars of Value Investing are more successful than most other traders and investors in the stock market. One of the most aspects of value investing is understanding Core Competencies.
People own the stock without understanding how the company is making money or what kind of business the company is into. When you invest in the stock market you are part owner of the business. Always invest in the business rather than the stock.
Following Herd Mentality
Investor invest in stock market becuase everyone else is doing. This is a wrong attitude. Invest in the stock market only if you understand how it works and what is take to make it work. One of the profound quotes in the stock market.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” – Warren Buffet
Not Following Disciplined Approach
Investing in the stock market is a risky affair. It required utmost understanding and sincere effort. A casual attitude while investing in the stock market may result in heavy losses. If an investor doesn’t work in a systematic approach to discipline and a properly structured strategy, it often results in losses from investing. Investors should follow systematic approach by properly analyzing various risk factors before investing.
Treating Stock Market as Money Making Machine
The above point is the least accepted but most abused while investing in the stock market. “Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected.” – George Soros
Investors and trader start to speculate and gamble in the stock market with a single large motive of making money in the stock market.
‘There is a huge amount of freedom that is derived from not fighting the market.’, Yvan Byeajee
Not Being A Student of the Stock Market
In my last session I asked a very simple question,”Who wants to succeed in the stock market and make money?” and everyone raised their hands, who doesn’t want to succeed.
Second question,” Who wants to be correct in the stock market?” and again everyone raised their hands.
Many fail to understand to make money in the stock market you don’t have to be correct always. Likewise, if you start trying to be right always in the stock market you tend to lose money faster.
Over To You
These are some of the most basic learnings in the stock market. Irrespective of his investing strategy or method of investing they can invariable used to enter the stock market.
These are very crucial points in the stock market to avoid a situation of confusion and failure in the stock market.
Come back here and tell us about the before-and-after. I bet you’ll have something to say! If you enjoyed this post, I’d be very grateful if you’d help it spread by emailing it to a friend or sharing it on Twitter or Facebook. Thank you!