The 5 Ways To Lose Money In The Stock Market (Video)
Value, Long-Term Horizon, Portfolio Strategy
Seeking Alpha Analyst Since 2012
I write investment analysis for The Broken Leg Investment Letter (www.brokenleginvesting.com). Furthermore, I have been investing in Greek stock market since 2001 and I own a blog about it (Investorblog.gr) since 2007. My investing style is longterm and based in value investing and fundamentals. I do not take into account technical analysis. I can hold my position for years, but if conditions change or I have an early good performance, I have no problem to close my positions. I have received my MS'c degree in Economics from University of Peloponeese, Greece (Mark: 9.1 , 3rd Rank)
Summary
- Business Deteriorates.
- Overpaying.
- Panic Selling.
- Non-diversification.
- Unlimited Averaging Down.
(The original article was published on Investorblog.gr)
The 5 Ways to Lose Money in the Stock Market
People invest in the stock market to earn money, but very often they end up losing money. It would have been better for them, if they had asked this simple question: “How can I lose money in the stock market?”.
The fundamental reason for losing money is the disparity between value and price, and can come in a combination of the following three general forms:
1. Business Deteriorates: You don’t get the value you had thought you would, because the performance of the business deteriorates.
2. Overpaying: You pay too much to acquire the business.
3. Panic Selling: You sell below the intrinsic value, because you cannot withstand the falling price.
The stock is the cell, but the portfolio is the organism. In order to keep your portfolio alive, you have to know how it can die. I add the two elements that can severely hit or destroy a portfolio.
4. Non-Diversification: A losing pick or a sector, can destroy the whole portfolio.
5. Unlimited Averaging Down: Averaging down is a good practice in general, but if it is unlimited, without realizing it, it can lead to severe loss.
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Analyst's Disclosure: I am/we are long SEPGF, BTGOF.
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