Top 3 Reasons Why People Fail in the Stock Market

Many articles and books have discussed the many good characteristics of successful people in the stock market — either being a trader or a long-term investor. But, iilan lang ang nagsusulat tungkol sa big “whys” of failures in the stock market.

In this article, we are going to discuss the top 3 reasons why people fail in the stock market. Though there may be many reasons why, these 3 are the most critical of all. These 3 reasons may sound to be very simplistic but it is never a good laugh to experience losses in stock market investing because of these “simplistic” reasons.

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Following someone else’s opinion

No one should enter the territory of stock market trading and investing without arming himself with reliable weapons of knowledge. While we do not discount the value of having mentors or coaches, trading and investment guides, it is crucial to emphasize that investment ay parang toothbrush:

You cannot rely on making sure your mouth is clean by using other people’s toothbrush and not yours! Yuck!

Entering the stock market, either as an investor or trader, is a responsibility big enough in itself. Most people fail in the stock market because they entered it as “clueless” newbies, seeking various opinions of other people and then expecting to earn so much through “copy-paste”.

Walang standard at one-size-fits-all na trading at investing plan. While there may be several guides (i.e. charting patterns, financial analysis, risk management, weekly stock picks, etc.), a person’s success or failure in the stock market will depend on how well he was able to execute his trading or investing plan.

In another way of saying it, people enter the stock market with differing financial goals.

So, it is wise to enter the stock market with eyes wide open. Considering other people’s opinion can be sound advice at times but you should not just copy someone else’s style. Your appetites for risk may be at opposite poles and you may end up playing the blame game.

There have been countless stories like these: A day trader imitating a long-term investor, a long-term investor trying to imitate an impulse trader. Falling into this pitfall of following someone else’s opinion can be quite dangerous especially when the results of your stock market investing/trading do not match your expectations.

Also, asking for too many opinion from others about your investments could cloud your own thinking with their personal biases. Making an investment or trading decision just because “they did this” or “they said this” is very dangerous.

People who belong in this category will most likely spend most of their time sniffing for others’ opinions and blaming other people for their losses and wrong decisions instead of taking time and effort to learn and study their own investments.

To avoid failing the stock market, study yourself, create your own plan, and execute it. Do not be someone else’s puppet. You may end up losing your money.

The second reason why many people fail the stock market is…

Having no defined financial objectives

Another critical reason why many people fail in the stock market is having no defined financial objectives.

While it is true that no one can accurately predict the movement of the stock market, it still pays to have your own financial objectives defined from the very beginning.

Most people have jumped onto the boat of stock market without any idea of where they are headed to in the end.

Among the typical questions that can help you in identifying your financial objectives are:

  • How much return do I want to get?
  • How many years do I want to work on my plan to get the return that I want?
  • Considering my desired return, am I going to be a full-time trader, balanced investor or a long-term investor?
  • If I chose full-time trading, what stresses await me?
  • How am I going to get my reliable source of knowledge to achieve my desired return?

Many people fell into the notion that once they get into the stock market either as an investor or trader, they are assured of getting their money back (and even more!). But that is an end in itself.

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Getting into the stock market is one thing; knowing why you entered it is another thing.

And the “why” is the driving factor that can get you and your financial goals far ahead.

Same it goes for people believing that their success in the stock market depends on the system they work with. Well, yes, maybe.

But, it is not everything.

The most trendy software or the most popular financial expert cannot give you one thing:

Your own personal financial objectives.

Know your financial objectives and you are then sure to never get lost in the long run.

Should you make mistakes or wrong decisions, it is helpful to have your financial objectives written down in black and white so you can always refer back to it. In that way, you may get sidetracked by economic distractions or opinions and biases but you can always get back on track because you will remember the great “why” of your stay in the stock market.

Viewing the stock market like a gamble

Lastly, another reason of most stock market failures is that people tend to look at the stock market like one big game of gamble.

Doing the stock market as if it is a big gamble can result in a poor mindset among people that their primary goal is just this: I will give more money in order so I can buy more hope of winning more money! It is a vicious cycle and very stressful too!

Yes, it may seem like it because of the unpredictability and volatility of the market. But, in order for you to win and stay afloat in the long run and achieve your own financial objectives, you must view the stock market differently.

Look at the stock market as if you are running your own business or you are building your own empire. View it as a business concept very dear to you that you have plans how to execute your financial objectives. Think of it as a business where many are at stake, not just your money and time.

Any business requires continuous studying. Likewise, every business needs persistent efforts in order to achieve its target.

No businessman, in his right frame of mind, would totally sell off his business assets after just one wrong decision. A good businessman knows that he can always refer to his objectives. He can always adjust his plans to better execute his goals.

Just like in stock market trading or investing, make your business grow. Do all you can to protect your money and make it grow to its maximum potential.

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