Understanding Stocks

WHY INVESTORS LOSE MONEY 167
2. Trade less. If you are a trader, you should limit the number of
shares that you trade. As it becomes more difficult to make
money in the market, some people mistakenly try to win back
their lost profits. Greed is more powerful than fear, which is why
some people will mortgage the house for a chance to get rich
quickly. If you must trade, trade with less.
3. Study more. If we do enter into a lengthy bear market, use the
time to study the markets, read books, and brush up on fundamental
and technical analysis. When the market does come back
(it always does eventually), you’ll be prepared with a handful of
new stock picks.
Mistake #10:You Miss Out or Mismanage Money
Managing money is a difficult skill for most people, but it’s one of the
most important skills to have. Unfortunately, if you can’t manage
money, you’re destined to have financial problems (unless you hire
someone to manage it for you). In the end, it’s not how much you make
but how much you keep that matters. Do you want to know the secret to
making money in the stock market or with any investment? Don’t lose
money. (Don’t laugh—it’s true.) If you think about it long enough,
you’ll realize that this makes a lot of sense. Obviously, it’s not easy to
find investments where you don’t lose money, but that shouldn’t stop
you from trying.
Just as harmful as mismanaging money is missing out on moneymaking
opportunities. A little bit of fear keeps you on your toes, but too
much fear can cause you to miss out on profitable investments or
trades. It’s the fear of loss that prevents many people from buying at the
bottom. It’s the fear of missing out on higher profits that prevents people
from selling before it’s too late. Usually, fear results from a lack of
information. That is why it’s essential that you do your own research
when a financial opportunity comes your way. This gives you an opportunity
to make an informed decision based on the facts, not on emotion.
Obviously, you aren’t privy to all the information that you need in
order to be 100 percent right. You have to make a decision based on the
best information you have at the time. Many times you’ll be wrong.