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Why do the majority of middle class investors lose money in the stock market.....?

Not just middle class investor also retails investors who recently started investing tend to lose money because of not learning lessons on time.

Below are the some common reason why middles class investors will lose money.

Focusing on Quality rather than quantity:

Because of middle class mentally we feel like buying 100 rupees stock will give more return than buying 1000 stock , but for example if our investment amount is 50000, 10% on both stocks will be 5000 in both the cases but stocks less than 100 rupees will be more volatile , there are chances of operator driven and the same time I am not saying stocks over 1000 rupees are not quality stocks, prefer quality stocks rather than penny stocks.

FOMO Fear of Missing Opportunity:

Most of the retailers have this FOMO when any stock price started increasing people tend to get Fear of Missing Opportunity they tend to buy stock what ever price it is trading, they won’t look why price is increasing , is it short term effect or long term effect.

Not understanding their Risk appetite :

Many don’t understand what is their risk appetite and what is risk reward ration, why we have to strictly follow risk reward ratio. General risk reward ration will be 1: 3, that means target price should be 3x and stop loss 1x.

Overcrowding portfolio:

Some people tend to buy whatever stocks they are are hearing they will over diversify their portfolio, Maximum stocks you can have per portfolio is 15 to 20 at most 25, but if you are having more than that means you are over diversifying , you may not get expected returns , and diversification only means different stocks, diversification means investing on stability good like GOLD and investing across other markets

Only focusing on short term:

Just don’t invest in stocks because it have short term growth , focus on long term as well, Understand how those changes impact in long term and are there any risks that affect the long term growth.

Not having enough financial knowledge:

Even though you are new to stock market do some research before investing, learn some basics at least . And participate in some stock market discussion group there you can every one view, I am helping traders/investor to solve their queries through PRIVATE TELEGRAM Group for only Stock Market discussion for learning purposes. If you are really interested then use the link in my profile to join the Group.

Trading rather than Investing:

After gaining 10% to 20% people started to book their profits, Profit booking is not wrong but you should do with like partially booking with proper sizing. If you are exiting with 10 to 20% you may not gain their multibagger returns . If you are exiting stock within one year means it is like short term trading, If you want to invest , First make plan and invest regularly and book partial profits when you feel that stock is over priced and don’t forget to add more when you are getting share at fair price.

Image source: L&T Financial Services.

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FunTech Team

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