There are many people who start investing in the stock market every year however 90% of them do not make any money or they make money the first year and then give it all up the next year. In this article let’s discuss the top 5 reasons why people fail in the stock market and what it takes to be a successful investor.
Rule#1 Never lose money. Rule#2 Never forget rule#1 – Warren Buffet
Greed is the number one reason why beginner investors fail. One thing fundamental to investing that you must remember is that investing is so much less about technical or fundamentals than mindset and psychology. You must practice removing your emotions from this game as much as possible.
Being human makes it impossible to remove this 100% out of the equation but try to reduce it as much as possible. To help eliminate the greed emotion set a limit on sell orders as soon as you enter a trade with an upper limit. Do not be greedy and try to hold a position. This applies more to a swing and day trade position. Long-term investing is a different ballgame.
Read these books even before you start to put a penny into the market
You may have already heard this buzz word or if you are new to investing you will hear this soon enough. The “Fear Of Missing Out”. Often, an investor will sit back and watch others profit while refusing to participate because they believe the price of an asset has reached its peak. Instead, the asset price rises further. Repeat that scenario as many times as it takes for the investor to say, “I need to get in.”
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As a result, the investor frequently purchases the asset near or at its peak. And as soon as you buy the stock goes down. This is classic FOMO which demotivates a lot of investors and many of them would exit the market forever believing that it’s not for them
Remember what people say that the stock market is gambling. Well, there are a lot of similarities and important learning that we can take from a casino. When you win back-to-back blackjack hand or roulette games you are on cloud 9 assuming all sorts of things.
A lot of emotions going through you that force you to play the next game and next and next. Until that point, you realize that you are back to where you started and worst case so much down from where you started. You regret thinking wish if I would have stopped at that point I would have been in so much profit. The exact same applies to stock market trading the more you play the less your probability of coming out as a winner.
Most of the investors that started around the pandemic will be familiar with this one and some of them would be seeing disastrous consequences of over-leveraging in the market. Everyone in the pandemic borrowed so much that they became oblivious to the fact that they are required to pay that money back someday.
Betting everything into one stock trying to be a millionaire over 1 trade, Buying stocks with money that you never had in the first place. No diversification in the portfolio and so much more. In the end when the market nosedives it leaves those investors completely naked.
Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. – Warren Buffett
Most novice investors just listen to a ticker from a friend or for that matter anyone on youtube and put their hard-earned money into that stock only to realize that it was their biggest mistake. They fail to do any homework or just do a casual check before putting in their money.
This may work sometimes however in a grand and long scheme of things you are bound to lose and the only person that you can blame at that point is YOU.