There is a saying that in the markets, only 20% will succeed whilst another 80% fails. Therefore, if you are an average investor, there is a good chance your investments are failing. What do most investors do wrong? Here are the 10 reasons why most people’s investments do not go as planned.
- Fall for fake news – in the past, false information often started as gossips and being limited in the trading rooms. When technologies developed, the forms and shapes of false information have also changed, and now spreading through social media platforms instead of concealed trading rooms. Traders who solely rely on other’s predictions and advice often fall for these fake rumors and news. Keep in mind, when the news finally reached your ears, you are certainly not the first person who has heard about it and there must be someone already exploiting benefits from the spreading information.
- Lack of discipline – Trading and investing in open markets can be compared with sports or even wars. There should be a strategy behind each and every move. The said strategy should be employed from the beginning when choosing which asset to trade or invest, and carry on throughout the buying and profit-taking phrases of the asset. Sadly, most investors often fail to uphold the rules set by themselves, which eventually creates a domino effect that destroys their whole investment plans.
- Do not have exit strategies – Most, if not all, successful traders have their exit strategies in mind. To cut loss from bad trades and be able to stop the bleeding is crucial. Sometimes short-term traders are likely to force themselves to hold longterm because they did not have cut loss strategy in place when their trades go wrong. Instead of accepting the bad trade and act quickly on it, they ended up fooling themselves that they will keep the trades as long-term investments.
- Not understanding money management – Money in trades can be thought of as rations in war. Good money management will significantly boost your chance of success. In reality, most traders do not have enough understanding of this. Investing or trading on loan money, over leveraging, and the lack of backup funds are the perfect recipe to get rekt.
- Optimism makes you blind – In bull markets where every trades turned profitable, most traders will enter a euphoric state, believing that they have outsmarted the market. This can often lead to overconfidence and eventually, overinvestment. When the markets take a downturn, traders still caught in the hype will fail to realize and react quickly, in the end, they will go down with the markets.
- Did not learn from mistakes – Successful traders and investors alike, learned from their mistakes in the past. Bad trades or investments are valuable lessons most people overlooked or shunned away. The ability to learn from the past is what makes humanity thrives, make sure to look back and take notes on your mistakes to become a better trader or investor.
- Invest in something you don’t understand – There are plenty of trade instruments and tools available in the market such as options, derivative warrant, etc. These instruments can be very complex and take many hours of hard work to master. New traders should not dive heads on into these tools without full understandings of the way they operate as well as their pros and cons.
- Did not spend enough time studying – Trading and investing are just like any other hard skills in life. You will need to keep on improving yourself and never stop learning new things or techniques. Markets are dynamic, so should you.
- Blindly trusting the ‘Guru’ – Some investors take in information from the so-called ‘Gurus’ or ‘Experts’ but fail to distinguish the good and bad information. A lot of information does not equal good information. Do the research and find yourself reliable sources, and remember to do your own due-diligent before any trades or investment.
- Dream to get rich quick – This is perhaps the most dangerous thought for any traders or investors to have. Young and new investors often shared the false idea of ‘market will make you rich’. Keep in mind that there is no shortcut to success and if something sounds too good to be true, it probably is.
What sets good and bad investors apart is the ability to survive in the market long enough. Going through all the bull and bear cycles will make you stronger. All investments have their ups and downs. In order to become successful investors required something more than skills, it takes dedication, discipline, and other valuable attributes combined. However, the main trick to this is to never give up, because in the end, only ones standing will be the ones who are winning.
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