Why Most New Investors Lose Money in the Stock Market
Most new investors in the stock market lose money because they don't understand how it works. This blog post explains why, and provides advice on how to be successful.
Brian Feroldi (🧠,📈)
I demystify finance | Author, Investor, Teacher | Tweets about money & investing | 55,000+ investors read my free Long Term Mindset newsletter
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Why 90% of new investors lose money in the stock market:
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023 -
They don’t understand how the stock market works.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
If you don’t know how a company makes money or why the market moves up and down, you’ll lack conviction.
Without conviction, you’ll panic sell at the worse possible time. pic.twitter.com/QZdS8Pal1i -
They don’t know their time horizon.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
Before you invest, ask, “When do I need this money?”
It should be in cash or bonds if it’s in <5 years.
If it’s in 5+ years, the stock market is a great choice.
Figure out when you’ll need the money, then invest accordingly. pic.twitter.com/0T2qDTsCFc -
They don’t know their true risk tolerance.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
Your real risk tolerance can’t be theorized in a bull market.
It can only be revealed in a bear market.
New investors overestimate their true risk tolerance, which leads them to make far riskier bets. pic.twitter.com/FAjbfBisQF -
They ignore the downside.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
All investing involves risk. Profit is never guaranteed.
New investors are so focused on the upside that they are blind to the downside.
That causes them to invest more than they can afford to lose, which turbo-charges the emotional pain. pic.twitter.com/0QPu4kSlZ3 -
They performance chase.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
Good investing isn’t about buying what recently went up.
It’s about buying what you expect to go up in the future and selling what you expect to go down. pic.twitter.com/cq4qruHgLf -
They invest on emotion.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
New investors fail to realize just how volatile the stock market is.
Just because a stock is falling doesn’t mean it’s a sell. Just because a stock is rising doesn’t mean it’s a buy. pic.twitter.com/x4yDcDWfiK -
They hold bad investments until they "get back to even."
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
Stocks don’t know or care when you buy them.
Most stocks that are down big never recover. pic.twitter.com/rwlD0Wj9GS -
They don’t have a selling process.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
There are three big reasons to sell:
- You were wrong
- You found a better opportunity
- You need the money in your real life
None of these have anything to do with the stock price. pic.twitter.com/7ke9YLx0Vo -
They try to time the market.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
Timing the market looks incredibly easy in hindsight.
Timing the market in real-time is incredibly difficult.
Most new investors choose to learn this lesson the hard way. pic.twitter.com/HucbokL0WF -
They’re in a rush to get rich.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
Building wealth is a marathon, not a sprint.
How long you hold is the #1 most important factor.
The stock market is not a get-rich-quick scheme. pic.twitter.com/0nUfVxHcjM -
These threads take me a few hours to put together.
— Brian Feroldi (🧠,📈) (@BrianFeroldi) June 23, 2023
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