Stock Market investing mistakes are real. People often get lured into the stock market with flimsy promises of instant and over the top returns but fail to consider the inherent risks of such activity. This article lists the top reasons why investors lose money in the stock market.
Here some reasons why Investors lose money in the stock market:
The stock market is not an arcade and treating it as one could potentially set the stage for a series of unfortunate trades. A study conducted in the mid-1990′s supported this premise when it found out that people who trade too much saw 11.4% annual gains at a time when the market had 17.9% annual gains.
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Emotions like overconfidence, greed, and fear can get in the way of rational thinking. The trader may get away with letting caution fly to the wind, discard the best laid trading plans and system, and go with their emotion, but such behavior will catch up with him soon enough. Discipline is still the best way to go in trading.
Discipline is still the best way to go in trading.
There’s the pervasive tendency of traders to go with the herd against better judgment. This usually happens when traders see huge gains and try to jump on the bandwagon thinking the stock will continue in its trend. Usually, it will not. Case in point: the dotcom and housing bubbles in 2000 and 2008, respectively.
Another stock market investing mistakes is when traders focus too much on historical data, they often get lured into thinking that they know how the stock will move in the future. This kind of thinking will blind them from seeing real-time information that could have been a better gauge of future stock movement.
Many times, investors or traders fall into what experts call the disposition effect, wherein people with aversion to losses let go of their winning positions to lock in their profits, and hold onto losing stocks in the hopes that they will reverse in the future. Most of these investors fail to follow through their investing plan to return to a predetermined allocation of assets.
Responsible and profitable stock investing or trading entails common sense and discipline. The stock market is not without its dangers; however, much of these perils can be avoided if investors don’t get complacent and commit these common stock market investing mistakes. To learn the basics, check out the online investing course online.
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