Reasons Why People Lose Money in Stocks & How To Overcome This

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Here are what you need to know about why people lose money in the stock market and how to bounce back from the loss.

People lose money in the markets because they don’t understand economic and investment market cycles.

Business and economic cycles expand and decline. The boom cycles are fostered by a growing economy, expanding employment, and various other economic factors. As inflation creeps up, prices rise, and GDP growth slows, so too does the stock market decline in value. To avoid losing money during a market-wide drop, your best bet is to just sit tight and wait for your investments to rebound.

Basic Guidelines to Easy Investment for Young Investors

People lose money in the markets because they let their emotions drive their investing.

The marriage of behavioral psychology and behavioral economics — explains how investors make poor decisions. Understanding basic behavioral finance concepts can save you a lot in losses during your investment lifetime.

In investing, herd mentality is one of the worst behavioral finance mistakes, and plays out when you follow the investing crowd. Herding in investing occurs when you follow the group, without evaluating current information.

In the late 1990s venture capitalists and individual investors were pouring money into internet dot com companies, driving their values sky high. Most of these companies lacked fundamental financial stability. Investors, afraid of missing out, continued to follow the herd with their investment dollars.

To avoid losing money in the markets, don’t follow the crowd and don’t buy into overvalued assets. Instead, create a sensible investment plan, and follow it.

People lose money in the markets because they think investing is a get-rich-quick scheme.

You can quickly lose your investment dollars by heeding the outrageous claims of Penny stock and day-trading strategies.

To avoid losing money in the markets, tune out the outlandish investment pitches and the promises of riches. As in the fable of the Tortoise and the Hare, a “slow and steady” strategy will win out: Avoid the glamorous “can’t miss” pitches and strategies, and instead stick with proven investment approaches for the long term. Though you might lose a bit in the short-term, ultimately the slow-and-steady approach will win the financial race.

Your Road Map To Being A Better Investor

Credit: The Balance

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Bethel Chigozirim
Bethel Chigozirim is a passionate Writer, Editor, Speaker, Poet, Blogger and a bunch of many creative abilities. A trained Information Professional @Abia State University, a Public Speaker/Corporate Presenter and also a Certified Project Management Professional. She is a calculated risk taker with deep tech knowledge on investment, inspiration and lifestyle, with many online and offline publications to her credit. She is a Writer and Editor for Investment Watch; and most of her publications are geared towards inspiring people towards the right investment, Investment Opportunities, Personal Finance, Economy and Investment News. When she's not speaking, writing or exploring any of her creative abilities, you sure can find her reading, conversing with family and friends or finding a solution to a problem for the 13th Billionth time! You can follow/contact her by clicking any of the below: