Why People Lose Money In Stock Market | Zero Stock Brokerage in Delhi

 Why People Lose Money In Stock Market

Trading in stock markets is for everyone. Moreover, just like any other investment vehicle, stock markets have their common dos and don’ts. Those who look at this as a formula to make a quick buck often have a tough time.

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Here are some of the key reasons why some people lose money in stock markets while others leap ahead.

1.       Lack of Knowledge

Believing in rumours and acting on ‘trading tips’ received from unauthenticated sources can be dangerous. To trade profitably, you need to know the real potential of the company you plan to invest in, the key trends affecting that stock, and the micro and macroeconomic outlook for that sector.

2.       Treating the Stock Market as a Casino

The stock markets don’t really follow the high risk, high return philosophy. Investing without fully understanding the implications of the risk is as good as gambling. Earning real gains means leveraging reliable market knowledge and taking calculated risks.

3.       Being Impatient

Staying calm and analysing your portfolio when the market is crashing is always better than making a hasty decision or following the herd. Being patient allows you to know the implications and make a strategic investment plan.

Also Read: Top Benefits of Stock Market Investment

4.       Not Investing in Blue Chip Stocks

Blue-chip companies like the TCS, SBI, etc. have diversified interests proven business models and robust management practices. Their risks are generally spread across the business lines, brands, product lines, and geographies. Investing in such scrip, for the long term, is a sound strategy that may help you to earn some good returns out of your investments.

5.       Uncontrolled Diversification

While diversifying your stock portfolio is advantageous, overdoing, it increases your risk. According to the Modern Portfolio Theory, the benefits of portfolio diversification reduce when it has more than 20 securities.

6.       Lack of Discipline

Following a systematic investment plan helps you to set your goals and determine your financial flexibility. Once you achieve the predetermined returns, book your returns, and don’t be greedy. This also holds true in case of restructuring your investments.

While the above points are critical, consulting a financial advisor is always a great option. With their professional insights, they can put together a robust portfolio and suggest a well-thought trading plan that helps you to make the most of your investments.

Click here to open up your demat account with Zerodha.

Location: Delhi, India

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