The ratio of investors making losses in the stock market is higher than those who make profit. Those who continue to lose in the market conclude that it's all about luck, the absence of which will lead to financial ruins only. However, this contradicts with the experience of those who continue to profit from the market. This shows that successful investors do things differently from those who fail. So here are the reasons why investors fail in the stock market.
Appreciating the business:
Investors often flow with the market sentiments and forget to take into account that what they are owing by way of investing in a stock. It is important to know the business before blindly investing in a stock.
Most of the investors do the opposite of purchase when in a bear phase. This behaviour is a crowd habit, and successful investors do not include themselves in this category. According to great investor, Warren Buffett, an investor should not invest in a stock market until and unless he is prepared to watch his stocks value decline to half.
Paying too much:
A stock when bought should be a good bargain. The stock buying activity should be similar to an Indian's habit of bargaining for the good price in groceries or vegetables. A stock if not purchased at the good price could become costly in the end.
Derivatives and Stock Trading:
Investors who indulge in derivative trading or stock trading are deliberately driving themselves to losses. Investment has to be different from trading, where patience and discipline has a bigger role to play than anything else.
There is a thin line between being not stupid and very intelligent. An investor should learn to be not stupid rather than trying to act intelligent. Doing this will only save one from costly mistakes that accompany the behaviour of trying to be intelligent.