Why do new investors lose money in the stock market? , Why New Investor Lose Money in Stock Market?

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  New investors come to the stock market every year. These people want to earn a lot of money from the market. But many people lose money here due to lack of knowledge, or get trapped in some wrong stock and their money remains stuck for a long time. After the 2008 stock market crash, many investors did not stay in the market for long. In this article we will discuss why new investors lose their money. 

Buying stocks on tips – Without doing any research, investors buy stocks on tips and later they have to face huge losses. Nowadays there is a lot of fake people, these people give tips for their benefit from fake channels of Telegram, Facebook and YouTube. They ask investors to buy stocks and sell their own holdings. Or else they will ask to buy stocks whose price they want to increase. The promoter or the seller of the stock benefits from the rise in the stock price. Mostly all this happens in penny stocks. Penny stocks are very easy to control. New investors also buy penny stocks due to falling stock prices and greed. When these stocks fall, there is a lower circuit on them for many days. 

Fundamental Analysis – No stock should be taken without research. Learning basic fundamental analysis is not a big deal, it can be learned easily. Before buying a stock, we can do as much research as we do before buying a mobile phone. What are all the basics we should look at before buying a stock? 

  • Share holding pattern – Share holding pattern must be seen before investment. What is the investment of promoter, FII & DII in the company. The higher the promoter's share in the company, the better. The promoter holding in banking stocks is governed by the rules of the Reserve Bank of India. Along with the holding, it is most important to see whether the promoter has pledged or pledged his shares. It is okay if a few shares are pledged but if the pledge % is high then one should not invest in such a company. 
  • Company's income, profit and loss - In the long run, the income and profit of the company should always be in increasing order. It may be up and down for a short time but for the long term the company should always be in profit year after year. 
  • Future Plan – If you are investing money for a long time, then you should know what is the future plan of the company. In which sectors the company is going to invest or acquire going forward. 
  • Company on Debt – Never invest in a company with high debt. When there is a bull run in the short term, the stocks of these companies do well. These stocks crash in recession and bear run. Paying the interest of the loan becomes a difficult task for these companies. Future Group and Idea Vodafone is an example of this. 

Cyclical Cyclical Stock – Cyclical stocks run according to the economy, they have a lot of ups and downs and risk. For example, stocks of metal, sugar, textile, hotel and travel come under this category. Stocks of these sectors should always be taken only after research and knowledge. These stocks should never be taken at high prices. Otherwise, you can get stuck in any stock for a long time. 

Trading stocks on leverage LEVERAGE or loan  – New investors take stocks on leverage in the future for higher profits. In case of loss, they have to bear more loss. Some investors trade or invest in the bull market by taking loans. Trading should never be done without any knowledge and experience. If you do not have much experience, still you want to trade, then do it in cash market without taking margin and not in futures and options. This does not mean that trading is wrong. There is nothing wrong in trading by learning and teaching. Risk should also be taken as much as we can tolerate. 

Copying portfolios of large investors – There is nothing wrong with copying the portfolios of any investors. In this, you will know what and when to buy, but you will not know how to sell. You will come to know only after selling the investor whose portfolio you have copied. There can also be loss in this.

Profit booking – whether the investment is long term or short term, some profit should always be taken home. If your stock has become 2x, 3x or 4x in long term then book some profit or withdraw your investment. If the share price comes down, then your loss is reduced in this. 

Time the market sometimes – You must have heard the biggest investor saying that the market should never be timed. The market moves on its own accord. By timing the market, if you make the investment wrong, then the loss can be huge. Investors should invest according to their risk appetite, knowledge and capital.

Do not put all the money in one stock  – Our investment should not be in one stock or sector. If there is an investment of 5 lakhs then there should be at least 4-5 stocks. This type of investment minimizes losses in the bear market. It should not be that one buys 30 to 40 stocks with an investment of 5 lakhs. It should be our endeavor to invest that money in the stock market which is not required for a long time. 

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