Wealth isn't easy to generate they say, and one thing that investors do not like is when they witness a loss of revenue or money. But people do not know why they keep losing money, especially when they have a good stock portfolio. Well, if you are wondering why you keep losing money, then this article is just what you need to understand better. So, by the end of this article, you would not only know why you keep losing money but also know the possible ways to avoid such a decline. This is why you should keep reading to be more informed. Now, lets look at some of the reasons why it happens.
Reasons why your stock portfolio is losing money
Trying to get rich quick: There is a saying that it is easy to differentiate a wealthy man from a rich man. People online flaunting wealth such as flashy cars, and some of the most sophisticated gadgets are some of the wealthy day traders. Some investors always tend to emulate these sets of people and in return, they are left disappointed by the outcome. Trying to outsmart the market never ends well, which is why it is important to focus on generating wealth over time than that just means being patient and consistent.
Letting emotions get the better of you: No one is going to bash you for being human, by letting out your emotions. But one thing to know is that you shouldn't let your emotion get the better of you, especially when it comes to investing, as the effects could be hurtful. Some of the emotions that affect your decision-making abilities are;
- Being too attached to a company, especially knowing full well that you're not benefiting from them
- Be moved by greed i.e. wanting to attain more when in fact you ought to withdraw
- Making rash decisions as a result of panic, i.e. selling at a loss.
Complicating your investment: This usually happens when an individual is blessed with plenty of funds. Instead of being patient, they tend to alter their portfolio by investing where they ought not to invest. They fail to follow the simple principle when it comes to investing. This is one of the reasons that lead to investors losing money.
Currency Devaluation: As you know currency devaluation means a country, reducing the financial power of its currency. When this occurs, it usually affects investors, and some of the ways are;
- The trade balance is affected since there is a cheaper exchange rate.
- Forex investors are more susceptible to losing their monies due to the exchange rate being uneven.
Fees: This is another reason why investors lose money. One thing you should know is that, if you find yourself investing in an ETF or mutual fund, then you are most likely going to remitting on your investment. Sometimes people wonder how much they can lose from these fees. Well, to calculate this is simply multiplying the amount invested with the amount of the fee. By doing so, you would get an actual picture of what you lose.
Commissions: This is also what leads to the loss of money for investors. Now imagine you want to place a trade in the stock market. The next mandated thing required from you is to pay commissions. Let's say you have $2000 and to trade, you have to forfeit $10, you are already starting your investment at a loss. Avoiding these commissions or rather bringing it to the barest minimum is advisable and to do that, there are cheap investing sites you may have to try working with.
Defaults: This usually occurs when a bond issuer fails to pay up or rather, has no intentions of meeting up with the interest of the bonds. Investors who fall into this category usually are at greater risk when compared to others. It would interest you to know that you are most likely going to lose the full value of the bond.
In conclusion, losing money is usually not something any investor is keen on experiencing. As earlier mentioned, they tend to follow quicker roots and this can lead to their downfall. Also, it is expected that you seek a financial advisor's opinion to avoid falling down the trend. Plus, other things to put in mind to avoid future loss of money would be to not time the market and avoid investing your money in one asset. So, as promised we have shown you some of the wrong steps you are taking that are making you lose money in the stock market.
Lastly, it is important to address these wrongdoings as it would invariably lead to kicking you right back to where you belong, and that is to not lose money but rather make profits.