Why You're Losing Money in the Stock Market?
- Ishfaaq Peerally
- May 12, 2021
- 2 min read
📉 If you had invested $10 000 in Warren Buffett's Partnership in 1956 and, then followed him and invested everything in Berkshire Hathaway $BRK.B you would have $11.4 billion today. In the S&P 500 $SPX500 , $6 million. However, most people would not have achieved this. The stock market is a winning game but 𝟵𝟬% 𝙤𝙛 𝙞𝙣𝙫𝙚𝙨𝙩𝙤𝙧𝙨 𝙡𝙤𝙨𝙚 𝙢𝙤𝙣𝙚𝙮 𝙞𝙣 𝙩𝙝𝙚 𝙢𝙖𝙧𝙠𝙚𝙩𝙨 while the 10% who make money fail to beat the market. It is easier to win a gold medal at the Olympics than to beat the market. Why is that?
🤔 When I started as an investor, I was down 24% in 6 months. The main reason was that I didn't know what I was doing. You need to know whether you're going to be a defensive investor or an enterprising investor, then you need to have a 𝙘𝙡𝙚𝙖𝙧 𝙞𝙣𝙫𝙚𝙨𝙩𝙞𝙣𝙜 𝙨𝙩𝙧𝙖𝙩𝙚𝙜𝙮.
⌛The second reason why most people lose money in the markets is that they are 𝙣𝙤𝙩 𝙥𝙖𝙩𝙞𝙚𝙣𝙩. My best ever investment is GameStop $GME where I made over 3300% profits. I started investing in September 2019 and at some points, I was down 60%, I didn't sell. I just kept investing since I believed in my analysis. I had to wait over a year to break even and 17 months to make these massive profits.
📺 The main reason, however, why I believe investors lose money is because they want 𝙨𝙤𝙢𝙚𝙩𝙝𝙞𝙣𝙜 𝙩𝙤 𝙝𝙖𝙥𝙥𝙚𝙣 𝙚𝙫𝙚𝙧𝙮 𝙙𝙖𝙮. You don't have to trade every day, you don't have to look at your portfolio every day. Warren Buffett looks at his portfolio only every two weeks. The market will react to most news but this news is not going to matter in the long term.
🤑 𝙄𝙣𝙫𝙚𝙨𝙩𝙤𝙧𝙨 𝙖𝙡𝙨𝙤 𝙨𝙚𝙚𝙠 𝙪𝙣𝙧𝙚𝙖𝙡𝙞𝙨𝙩𝙞𝙘 𝙧𝙚𝙩𝙪𝙧𝙣𝙨, the returns of Berkshire Hathaway are 20% per year in the last 56 years, Peter Lynch did 29% per year, what makes you think you can make 50% every year? That's why investors jump from stocks to stocks. They see a stock going up, they will buy it, then when another one is going up, buy the other one. This is bad strategy. You buy stocks when they go down. You need to be a contrarian in the markets.
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