The most important reasons that make you lose money in the stock market

In this article, we will talk about the most common reasons that make you lose money in the stock market.

The majority of people lose money in the stock market, while only a small percentage of people manage to gain. Among the ten richest people in the world, Warren Buffett was the only one who got rich by investing in stocks. One of the tips that Warren Buffett repeats and considers rules  basic is

The first rule: Avoid losing money.

The second rule: Do not forget the first rule.

When the investor avoids decisions that expose his investment portfolio to loss, this in itself is a gain and there are several reasons that lead to loss in the stock market.

 First: Not doing enough research

In general, investment is always associated with a degree of risk, but in the stock market, this risk may be higher if a person is ignorant of the basics of investing in the market. For example, in the real estate market, it may be impossible to find a house on the outskirts of the city with a value of 5 million dollars and then find the same specifications as the house in the city center  worth a million dollars, but in the stock market this happens a lot and is repeated, so you find a share much higher than its real value, and another share less than its real value.
 Not doing enough research about the company, its assets, its performance, and the lack of knowledge of financial fundamentals and reading financial indicators, may make you get involved in buying shares that are higher than their real value, and thus lose your money.

 Second: Investing based on advice and recommendations from others and brokerage firms

Some brokerage companies do not care whether the investor will lose or gain, they will receive brokerage fees as long as the investor buys or sells, and the recommendations from people or social networking sites may not have any basis in truth and their goal is to affect the company’s shares negatively or positively in  The stock market is not looking for a recommendation to buy a share, but rather look for tips for building and managing the investment portfolio through which you manage your shares.
Avoid investing in areas that you are not aware of, and the best and most reliable source of information about any company is the company’s financial statements and annual report, through which the investor can find shares that have been valued less than their value, so you buy the stock when it is less than its real value and sell when it is higher  of its true value.

Third: try to earn money quickly

Most people want to make money quickly and get rich like the famous investor "Warren Buffett", but what most people do not know is that "Buffett" made more than 90% of his wealth after the age of 50, and that his wealth was accumulated thanks to long-term investments over more than  Five decades, investing in the stock market requires time, and patience is the key to success. In order to earn money, one has to buy good shares and wait.

Fourth: Not to diversify investments

Diversification of investments reduces risks, and on the contrary, lack of diversification of investments increases risks. Buying shares from one company or one sector may expose you to loss if this company or sector faces bad conditions.

Fifth: Retaining the losing shares and selling the gaining shares early

The majority of amateur investors make this mistake. They believe that it is safe to sell the shares that bring them good profits first, and keep the losing shares until they recover and start making gains. However, this method is wrong because it makes the investor sell shares that could have made him more profits.  Subsequently, he maintains shares that could cause him greater losses for the investor.

Finally, I hope you will benefit from this article