Why do people lose money in the stock market?
The most difficult question to answer. According to me, stock market is all about managing emotions.
One solution could learn fully and then get into investing, The difficulty with this approach is that, learning stock market is an emotion and it will take a lifetime. In this learning process you will not feel like getting into it. This is what the majority does.
The second set of people are the one, who gets their hands dirty by getting into it. Just like me. They invest and they start learning their lessons out of it. Even in this group there are people who stops investing when they start losing huge chunk of money.
There are 3 reasons why people lose money in stock market,
1. Learning Attitude
2. Attachment with Money
3. Clear goals
Learning attitude :
One of the most important reasons of all is learning attitude. Stock market is not something which is taught in schools and colleges. In the recent days, there are many classes available on Trading and investing front.
Are you ready to learn stock market related news ?
Will you do the proper analysis before investing ?
Stock market related news are readily available in some of the leading magazines like Outlook money, Dalal Street journal etc. Also available in daily news paper like Economic times.
My favourite one is online websites like money control and Economic times.
All the above provides basic idea on stock market and provides in depth coverage. I started learning from these for the last 10 years.
Most importantly once you had invested, are you ready to learn from the losses. My friend got dejected after losing lots of money and he never returned to stock market.
Another friend told that his father had lost huge sum of money and just because of that he is afraid of stock market.
We all know that only way to grow in life is having learning attitude and it can only show the light inside the tunnel. Even in stock market, learning attitude is the only light which can help you in creating wealth.
Attachment with money :
The most important reason for people to lose money is their strong attachment with money. It is disheartening to lose a huge sum of money when you believed in a stock and that stock turned out to be a dead investment.
Most of them who are investing will invest their entire sum of money, without taking care of other things in life. They wont have emergency fund and that will make the life more difficult.
If you had seen your closed ones suffer like this, then it will have strong impression that it is not good to invest in stock market.
Clear goals :
The only goal who have lost money in stock market is to make passive income or make money in the short term.
Even I have come into this with that attitude to make money and enjoy life. Soon realized that stock market is not a place to make money in a short span, it is a place to create wealth and it will surely take lot of time.
You should come into stock market with the amount you are going to invest.
You should invest only in Large cap stocks that too after analysing the ‘basic’ fundamentals
You should have a stop loss or how much amount you are ok to lose initially.
Finally you should stay invested for a minimum period of 3-5 years.
Once you are clear with these goals, then the huge returns is the by-product.
If you are able to look into these 3 reasons before investing in stock market, then it is easy to create wealth.