Stock Market Basics

Losing money is not funny at all. It hurts. Yet people don’t alter their strategies and behavior. Instead, they switch their investment from one company to another, hoping they would earn this time. But they don’t. The problem is not stocks, it’s you. These few stock market basics will point out why you always lose money.

  1. You never admit your mistake
    The problem is you cannot ever admit your mistake. Hence, you never learn from your errors and keep repeating them over and over again. For instance, you buy a stock and you realize you shouldn’t have bought it. That’s a mistake. Later, to get rid of it, you sell it at a loss. Another mistake. But you don’t learn. You repeat this process again.
  2. Why are you always greedy? Or always scared?
    Some people sell too early to book their profits and move out of the game. They are scared the price might come down. On the other hand, there are few people who are greedy. They wait for the right time. And after the time arrives, they still wait in hope to get more profits. So, what do you do? How do you determine the right time to sell a stock? Determine your goals before buying a stock. As soon as you reach your goal, sell it off. Simple?
  3. You want over-simplified conclusions
    You heard the prices of oil are about to rise. So, you buy the Oil company’s stocks. Now, this is a very simplified conclusion. For your information, finance is not so straightforward, it’s very complicated. Learning stock market basics is not enough to make big money. You must understand the fundamentals.
  4. You buy what’s hot
    Banking was hot, once. People all over the country bought banking stocks as it provided high returns. And suddenly, boom! There came the sub-prime crisis. Similarly, all hot things (specifical stocks) rise to a certain point and it bursts. Hence, if you are investing in what’s hot today, it might blow up tomorrow.
  5. You pretend you know everything about your company
    You read in the newspaper about ‘X’ company today. It’s hiring and it’s about to declare bonus. That’s it. You think you know everything about it and you pounce at it. However, don’t know the real story. You don’t know what’s going on in the company. They may be hiring because a number of people might have resigned in the past few months. I mean, there can be many other reasons for it. How can you decide to invest based on this single fact?

I understand. You are an investor and you want to buy & sell stocks. However, at least take the pains to know stock market basics before involved in the trade.

READ ALSO: Invest in Stock Market Like a Pro

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