A stock market is a place where people come to make money quickly and fulfill their needs. But the opposite happens. One has to understand that it is a skill-based business and the one having the required skills is successful in the stock market and make fortune. Apart from the skills required, there are many reasons for losing money in the market.
The following points define some of the reasons for losing money in the market:
- Due to the different businesses involved, it is difficult to speculate and decide the right trend of a stock. The desire to make money in a short period lets people fall prey to the false marketing done by the firms, and the money is lost due to trading and investment in the wrong stocks.
- People want to follow the crowd and do not follow the actual trend of a stock and that is the reason people lose money. The skilled traders patiently take decisions and follow the trend and make money. They stick to their strategies without getting affected by the crowd and mass.
- One of the reasons for losing money is that people put all of their money in fewer or just one stock. This can be due to their arrogance or ignorance of investment. Not distributing your investments is like gambling where the aim is to quickly win a lottery and not to earn a decent return on your investment.
- Money is lost due to the herd mentality of the people. They buy a stock just by hearing from friends, colleagues, or some news that the price of that stock is going up. This will earn them a loss in most of the cases because others’ goal, horizon, and strategies to buy that stock may be different from yours. You should plan your investment by researching the business of that stock.
- Another reason for losing money is due to the dynamic nature of the businesses that people invest in. Globalization has enabled all businesses to enter the market and open it for investors and traders, but along with this comes the uncertainties and dynamic nature of the business. This is because they are affected by government rules, politics, demographics, and market fluctuations. All these activities happening at a global level will affect the market significantly, also changing the decisions of the investors.
Warren Buffet says, “the stock market is a device for transferring money from the impatient to the patient”. Detailed research should be conducted and enough knowledge and skills need to be gained before investing and trading your money in the stock market. If you are not getting rewarded enough already, then it is time for you to introspect and understand the dynamics of this market properly.