loss in stock market, Stock market provides investment and trading opportunities to investors and traders. We hear of few success stories of great investors which attract us to markets. But there are also loss stories.
People come to market with plans, strategies, hopes , dreams and pocketful of cash.Most of them are disillusioned when the strategies fail, hopes are belied , dreams turn into nightmares and money is just gone.Stock market losses hurt a great deal. This question seeks to know how the losses occur.
How Losses are Made ?
There is only one way of losing money.
Selling at a price lower than the Buying Price.
Do not do it. You will never be a loser. Simple !
But not easy.
When you buy a stock, the price is not static. The moment after your buying, you become a seller looking for a better price. The time window may be 2 minutes, 2 days, two years or even two decades, at some point you have to sell to realize your profits.
Stock price moves either way. If it goes against you, a wait and watch game starts. If the decline is steep , one is at a loss to understand what is to be done. The decline continues and after sometime, the investor wakes up to the realization that a wrong investment was made and it is time to exit.
That is when the losses are booked by selling at a price lower than the buying price.
Can the investor not wait further?
Surely, one can wait. But there are no guarantees that the price will rebound. So a decision is made which may turn out to be good or bad in the long run.
In year 2008, Reliance Communication share was a constituent of NIFTY index. It traded at a high of Rs. 844.70 in January 2008. It has been in a terrible decline since then and traded at Rs. 18.40 on Friday, June 09, 2017.
Those investors who did not exit in this long period have seen the stock become almost worthless.
Same is the story with Himachal Futuristics, Suzlon Energy, DLF, UNITEC, GVK, IVRCL, Jaiprakash Associates and many others.
Even with the markets at all time high, these stocks are near their low price.
Some people call it wrong stock selection. I accept it as part truth.
Anyone can go wrong. But action should have been taken to exit at some point of time before the loss becomes unbearable.
Such situations can be avoided by good stock selection, having a diversified portfolio and getting rid of the poor performers in your portfolio.
How to Stop Losing ?
Having learnt how the money is lost, it is easy to make a strategy for stopping the losses. Invest in High Quality Stocks only.
Review your portfolio from time to time. Take out the weeds ( poor performers) and let the flowers grow. A few good stocks will make you rich.
Learn how to pick Quality stocks more from tradepsychology.com, Happy investing.