Why does Small Retail Investors Mostly Loose

Inspite of more Transparency, inspite of the Advances made in the field of
Communications, in spite of there being more awareness about both companies
and investing, people still loose money (some are successful). At the end
they give a variety of excuses to show that fault did not lie with them, but
other factors contributed to their failure.

Having seen many investors in my stock market career, I can without doubt
say that most of these excuses are so pathetic that the investor himself has
difficulty in actually believing. But to show to others that he did not trip
up he coins these excuses.

I will hereby try to analyse why investors, at least the majority, loose.:thumb:

When an investor comes into the market, he is generally anticipating a
return, which is more than what he can get by investing in other places.
This in turn means he should be looking at around 24% return per annum would
be quite attractive given that any other investment may not yield more than
12% per annum. This kind of return expectation is moderate due to the fact
that the Investor takes more risk and more risk should always mean more
gains.

But in actuality, an Investor hopes to make a killing in the market. He
would have read or heard somewhere that how some person had made a killing
in the stock markets and he comes with a fixed mindset of making his
investments double in one year if not more.

The said Investor is least prepared and least bothered as to how to select
stocks. At no other place will a person spend money on someones sane or
insane advice, as he would do in the stock market. Just as an example,
suppose you want to buy a new television. Do you buy just because someone
recommended it, - of course not. You will go to innumerable TV showrooms,
checks out what all are available and depending upon your necessity will
decide which best to buy. And here I am talking of a maximum investment of
15,000 rupees. But in the Stock Market, Investors put faith and money to the
tune of Lakhs of rupees just based on either someones advice or even
overheard conversation.

Most investors dont enter into the markets when they are down and there is
a picture of gloom in the market as a whole. If asked to invest, they just
go away saying that investing in the markets is not at all profitable and
how he has heard about losses incurred by market participants. When the
markets start moving up, he still neglects the same saying either that time
is not ripe enough for investment or saying that he will enter into the
market when they return to the previous low levels. The markets advance
still more when a small section of investors test the water by making a few
small investments. The market moves up still farther giving small profits to
the Investors small investments. He rues the fact that he invested so less,
but still books the profit available to him. The markets meanwhile have
moved still up and have started to make news. All papers and television
channels start carrying reports about the rise in Index that is happening in
the markets. Now the Investor starts to believe that this time the market
has no way to go but up and he well may profit from the rise. And because be
believe be will get out at a small profit, he invests much more than he
would have done any other time. The markets continue their rise and the
Investor gets into profit. But our Investor is not selling, because he has
come to believe that the markets are not going to see the earlier levels /
rates and since his luck is running great, why not take advantage of it. He
also believes that even if there is a small fall, it is advantageous since
he will be able to get into his favorite stocks cheaper. He believes that he
has the capability to withstand such small falls.

The markets now start to slide a little bit. But our Investor is not
worried. Of course, he knew such a thing would happened. He may even try to
enter a few more stocks since the rate is cheaper. But the slide continues a
little bit more. Our Investor in not unduly worried since he believes it is
just taking a little more time to recover than he expected and isnt it true
that the Analysts are saying that. Suddenly one good day there is a very
huge drop. This is where Fear comes to him. He hopes that the market may
bounce back. But the markets continue to fall. Investors who had invested
with the help of margin money are the first to get out (kicked out). With
regard to Investors who had invested their hard earned and saved for a very
long time money, they curse their luck and hope that some day, their rate
may come. { Infotech Boom Investors are still waiting!}

This phenomenon is not limited to India, but is the same everywhere. Every
bull market is followed by a strong retraction if not a bear rally. Small
Investors get butchered never to return to the market. But in the next rally
a new wave of Investors come. As old water flows away new water takes their place. Only if Investors follow prudent Investment policies can they avoid
falling prey to this cycle of Butchering.

Thank you praveen.
This one write puts forth the whole life of a trader. From birth to death. It is sorry that they die a premature death. Its very much right that this is a phenomenon through out the world. That is human psychology.

It's part of the learning curve, those who do survive the onslaught of this first level, take responsibility for their mistakes. Start learning more and imply their knowledge a little more prudently in the next run. Some may get butchered in the next level.

Again a little more learning and the process goes on. The survivors are very few and they are left to be talked and envyed by all the losers.

I hope that the process which you had written would have been undergone by every aspirant in the markets. The same is true even with me. As I kept reading, I could see the past experience of mine coming live in picture just in front of me.

It was a great journey learning so far. There are quite some traders who have crossed the first level hurdle. Let the learning increase and give the best to those who strive to win.

Thank you once again, Praveen.

The earlier you begin investing, the higher will be your returns through your lifetime

Traditionally, the domestic market has a high level of household savings. It is advisable to start saving and investing in carefully-selected investment instruments as soon as possible in your earning years. There are many investment options available in the market and sometimes it is quite confusing for new investors to select the right investment instruments to invest their hard-earned money in.


Each investment instrument is designed to serve a definite objective and therefore, a fresh investor should take professional help to choose the right options, based on his requirements. It is very important for investors to identify various requirements and lock into a well-designed investment portfolio.


Here are some parameters you can consider while chalking out an investment plan:


Identify need

First of all, identify the broad requirements of funds in the short term (for example, support parents in marriage of brothers/sisters, own marriage etc), medium term (child's education, building a house etc), and in the long term (retirement/pension plans etc).


Tax planning

Taxes drain out significant amounts of money from your hands. Tax saving is one of the primary concerns of young investors. The first objective for young investors should be investing in tax saving instruments up to the maximum permissible limit.


Compounding effect

Money saved in the early part of life has more time to grow due to the compounding effect. Also, based on risk profile, young investors can look at exposure to good stocks and equity mutual funds for better long-term returns.


Insurance


Investors should take adequate insurance cover early in life. If you buy an insurance policy early in life, the premium turns out to be much cheaper due to the low risk profile of the investor.


Liquidity


Another important aspect is to maintain a fair amount of liquidity in hand. You need to choose some instruments that return back your money prematurely without much penalty in order to cater to any short-term unexpected need of money.


Here are some options in investment instruments:


Investment instruments can be classified in multiple categories. Based on the individual investment plan, investors can look for instruments from each category to build their portfolio.

Saving tax


Provident funds (EPF, VPF, and PPF): Provident fund is one of the safest investment options. However, investments in provident funds come with long lock-in periods.


Tax-saving mutual funds: The lock-in is much lesser in tax-saving mutual funds with a decent riskreturn ratio.


Tax-saving deposit: Bank fixed deposits with this option and NSC etc provide greater safety but come with a lock-in period.


Home loan: A home loan provides a good relief to tax payers. However, investors should plan the other aspects of life before buying a house.


Pension plans: Investing early in pension plans gives better returns due to the compounding effect. Investments for returns Mutual funds: They come in multiple flavours. Blue-chip equity funds, midcap equity funds, balanced funds etc. Young investors can take advice from a professional. A systematic investment plan (SIP) is a good way to enter mutual funds.


Stock markets: Investing in the stock markets is much easier with the advent of Internet trading. However, young investors should invest their hard-earned money carefully with a longterm perspective.


Investors should not be drawn by lucrative short-term trading. Often, investors end up burning their fingers due to lack of knowledge, access to news and events, and risktaking capacity. Insurance

Life insurance: Life insurance cover is a must for every individual. Young investors can take an insurance cover of around 3-5 times their annual income. Investors should lock into an insurance cover early in life as it ensures lesser premium due to a lower risk assessment.


Medical insurance: Many companies provide medical cover for their employees. In the absence of such cover, young investors can think of taking medical insurance early in life to get better illness coverage at lesser premium.


Equity-linked savings scheme: They provide a good mix of insurance cover with an investment in mutual funds. Young investors should analyse various charges/fees of the scheme before taking an investment decision.

Start early

Every market analyst and expert says investors should start saving and investing early in life. Investing early gives time to your investments to grow by way of compounding and provides a cushion to absorb risks. However, it is equally important to plan your investments in multiple investment instruments carefully to get all round benefit and risk cover.

Thnk you bro for appreciation but I am not eligible for this appreciation as watever I post is not all my posts and upto 60% and are copy pasted from different groups I join and many are send to me by my friend ya I chose best ones to post here so lets thnk god for sending us that material which is of use to all of us:thumb:

Your honesty is appreciated.

If the original post was not written by you, then it would be nice if you acknowledge the source. That way readers will know about the person who actually wrote such a useful post and may visit the author's web site.

Not acknowledging the author is tantamount to plagiarising, isn't it?

Bro I recd that from a friend who is also an investment consultant and when he send me mail he just copy paste the material which is of my use I requested him tell me source but he says i dont remember as he after forwarding all delete original post sorry cant help on that

Not all the small investors loose, but the small investors are the lucky ones as they get less loss then the people who have invested a lot. So I think it is better to invest small amount and be safe.

Bro never count money look at %
If a man invest 5crore and he lose one lac and other invested 25k and he lose 10k who lose much
No ofence meant but I want some good suggestion from aw10 or savant bro or murtaza columbus linkon etc who are gems of TJ people like you and me are always on recieving end so better we wait for good suggestions on how retail investor can earn with small % of loss:thumb:

i hope seniors will give good suggestions.

praveen bhai you are right, if we see the % we lost it's ok, but when we see the number which we lost, it's really big pain.

Hi PT,

I mentioned in many threads that GREED & FEAR are bitter enemies
of investors of any type ,let it be retail or otherwise.