Do Most People Who Invest Lose Money?
If you’re an investor, whether a beginner or a professional, you’ve likely come across the statistic that 90% of novice and professional investors lose money in the stock market. As shocking as it may seem, it is a reality.
To be a part of the 10% of investors winning with their investments, you need to learn from the losers’ mistakes. Great option is to join the course hosted by the famous Rich Dad Poor Dad book author Robert Kiyosaki. Before doing that, let’s check out Gerald M Loeb’s opinions.
Why Do Investors Lose Money?
Gerald M Loeb is a legendary investor, and in his book ‘The Battle for Investment Survival,’ he wrote, “Nothing is more difficult, I truly believe, than consistently and fairly profiting in Wall Street. I know of nothing harder to learn. Schools and textbooks supply only a good theoretical background.“
Loeb believed that investing is a constant learning process through practice and focusing on improving your investing abilities.
The following are reasons why most investors, both new and seasoned, lose money:
1. You Want To Get Rich Quick
The stock market is not a place for you to make money quickly. While some make big profits quickly, not everyone can be so lucky, and it’s not a risk you should take if you need money fast.
According to Loeb, a stock price is a snapshot in time, and you should instead look at high-quality stocks that will give you greater returns over the long run.
Another thing investors tend to do when they want to make money fast is to emulate successful traders. Don’t be fooled by their pictures and videos of big, fancy houses and expensive, luxury clothing. Most of these traders spent time with their investments and built their wealth over time.
2. Not Enough Research
Many investors will turn to “professional” investors or “finance gurus” and follow their advice, such as which stocks they favor, etc. This is a bad mistake if you’re not doing the research yourself. These recommendations might not align with your goals and can become bad investments for you.
Before you invest, first determine your “why” and “what” and put in the work by researching various investment opportunities.
3. Not Diversifying Your Portfolio
We’ve all heard the saying, “Don’t put all your eggs in one basket.” This is an essential aspect of investing and not losing money. By diversifying your investment portfolio, you can protect yourself from stock market corrections, weak economies, and bear markets.
A diversified portfolio’s purpose is to incorporate a variety of industries and categories that react differently from one another. This reduces risk, especially in the long run.
However, you will still lose some money even though you have diversified your portfolio. The point is to have a good mix of ETFs, REITs, commodities, bonds, stocks, etc. In the end, your investment decisions should be based on your goals and how much time you have, but you should always diversify.
Here are many reasons why both new and professional investors lose money, but it’s important to understand why. Set investing goals that align with you personally, do the necessary work, and you can avoid significant losses over the long term.
To quote Loeb again, “Human likes and dislikes will wreck any investment program. Only logic, reason, information and experience can be listened to if failure is to be avoided. Accepting losses is the most important single investment device to insure safety of capital. It is the action that most people know the least about and are least liable to execute. The most important single thing I learned is that accepting losses promptly is the first key to success.”