Why do People Lose Money in the Stock Market?
July 11, 2014

Losing money in the stock market can be a major financial setback for any individual. Many experienced share traders have lost their money in the share market. Share market is extremely volatile. Sometimes it becomes very difficult to judge how the stocks will behave. If you are a share market investor you have to be a careful observer. If you start losing money in your investments it is time to pause for a while and analyse the reasons. Maybe you are not making the right decisions or, too impatient to double the money. Reasons may be many; however, there are some generic reasons which need to be kept in mind while investing in the stock market.

The common blunder that every stock market investor makes is investing a huge amount on a particular type of stock. Since investing in stock is a form of betting so the thumb rule is to ‘Spread your betting’. Invest in all kinds of stock and do not concentrate on a specific type. Spread your money and invest in low risk, medium risk and high risk stocks. This way if one stock fails you will still be able to gain profits from the other.

Share market is volatile. Once you start investing, you may get advices from your peers. Follow the right advice. This way you will hardly be able to make good profit from your investment. Seek professional advice. Become a member of online stock trading forums and listen to top notch financial advisors. The posts, comments and various discussions on these forums will keep you updated on the stock market front. Staying attuned to these forums regularly will help you develop an intuition of how the stocks are behaving.

Another common reason for losing money in stock market is impatience. Investors new to the market generally have an idea that money grows very fast. The tendency is to make fast bucks by impulsively buying and selling stocks as a result of which huge losses are incurred during these transactions.

Make it a habit to track your stocks regularly. If you don’t you may just miss correct time to sell or buy a stock. Research is very important if you want to make profits in stock trading. You should be in a position to feel the pulse of the rising and falling prices. Change constant in a stock market. The shares that were good investment before may be a bad investment today. You have to regularly update yourself about the happenings in the stock market – ‘what is in’ and ‘what is out’. Proper research can help save sinking ships many a time.

Last but not the least, another reason why people tend to lose money is that they rely too much on prediction. Often predictions have failed for stock markets. This doesn’t mean that do not pay heed to any of them but, you have to rely on your intuition more than the prediction. Be prepared for the worst. Always be on guard to control the risk factor.

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