While investment is a lifelong career, not many people can achieve such purpose. Most investors become “drop out” half way while trying. Many have entered market hopping from one trading method into another. Some started with stock, then moved on to binary trade, forex, option, then to cryptocurrency etc. Whatever method one is using, there are deadly killers on their ways that have moved them from one method to another. This article listed 7 deadly major killers most investors meet.
1. Early Gainer ~ early big gainer are those who have entered on a new trading method that has helped them garnered large profit but too early too soon. Ironically this early gainer does not help him last long. The main reason is because this kind of early profit normally boosts his eager and greed. He will think he has found “the best way” of trading. Sooner or later, his fantasy will push him make bigger bet. Once the unexpected market fall comes, his capital will be totally wiped out.
As such, it is not a good news if anyone enters the market but gain big profit too soon too early. But this kind of news or story always find its attraction to many new investors. Those so called themselves investor coaches or trainers would normally use this kind of testimonies to market their recruitment from unaware preys.
Stock market or any trading instrument would never hesitate to give big profit for anyone who comes in for a start. However market will have its way to get those money back in due time, or taken back even more than what he has earned. This can be easily understood due to human psychology in play.
2. Early Loser ~ Early loser is someone who entered market with early losses. No one will have the courage to go on using any trading method or investment that causes him to lose money in the first few attempts. However, seldom does anyone has the determination or knowledge that any successfully career preceded with experiences of failure.
Many investment seminar where the business minded trainer often quoted with his previous student achievement as testimonies on how good his approach to investment can be. When his newly enrolled students finished the course but failed to make money in their first a few attempts, they gave up totally. Ironically though, these students would hop to another seminar and try something else.
Eventually these cyclical happening will eventually produce more income for those marketing trainers. In short, people are earning more income from opening investment seminars than earning from their own investment.
Early losers should not blame the trainer or the coach. It could be due to the market timing when each student enter. When market timing is favorable, student would earn encouraging profit. When it turned up unfavorable, those early earned profit will be returned back into the market.
These are just how it is done in short term market investment. The key question is not on how much you made or loss when you invested into the market initially, but how much lesson you have acquired while doing market investment. Consistent profit will come after lessons learned.
3. Followers ~ Followers are those who come into market thinking to take the ride with secret tips given by successful expert. They are passively waiting for tips and enter market readily when these tips are released. These followers will experience some thrill of seeing profit begin to come into his account on paper profit basis. However over a long run, they will not make money eventually. Because investment is not about entering market, but rather the skill of knowing when to enter and when to exit.
Without exiting market correctly, there will be no real profit but paper gain only. Even if someone can enter market and exit market correctly, he is not guarantee succeed in investment as well. Because he has to do it consistently over a long period of time, say a number of years, in order to be considered a successful investor. This eventuality will come only when he has the determination to learn, improve, and develop his own way of trading skill. This rarely happens in the case of a follower mentality. A follower will quickly quit the job when he experience losing trade before you find him learning anything.
This has explained why there are 90% of stock market investor loss money while only less than 10% earning money. In any composition of a society or community, 90% are followers and only 10% are rational beings or leaders. These rational beings are perhaps the only ones making money in stock market, but not those followers.
4. Ambitious killers ~ whoever comes into market because of sales testimony of how quick rich previous students earned will certainly gear themselves up to make a major killing. There are many spectacular coverage stories often found in news article and magazine featuring how someone was successful making a big life out of the stock investment. In fact, stock market has produced numerous fabulous stories on how people can have become millionaires in short span of time. But these stories seldom cover those details, like patience, how they failed initially and their investment skills that make those people millionaires.
Anyone who has heard such stories would be motivated to try their own luck. But sooner or later these individual who has the desire to follow those stars would find themselves falling into the trap of mere fantasies. When reality set in, losing trades awaken them with broken dreams and consciousness.
5. Hopeful loser ~ Hope is the major essential quality of life existence either conscious or subconscious. When someone who have failed his lifelong earning a successful life will turn their hope in lottery as the last resort in gaining a fortune especially among elderly people. Buying lottery is using small money betting something big, though it is almost impossible most of the time. But this is the only “hope” they thought they have before they passed on. And little wining some of the times hocked up their “hope” for something big next turn. And this can go on and become an addiction until losing big cumulatively at the end unknowingly. This happens most the time with investors coming to stock market with similar mentality.
Hopeful investors are also those who have losing trades, started with short term players but ended up changing their mind to be long term “buy and hold” players when their trades are price trapped by the market. The only strategy they hold on is nothing but faint “hope” that market will recover for their advantage. These recoveries sometimes do happen but in rare occasion. Most of time do not happen. When they finally cannot endure losing anymore, they will let go. This has caused losing big eventually.
6. Rush in Mentality ~ Hot rising market investing instrument such as bitcoin, Apple recently caused irresistible temptation for many people to rush in buying into the vehicle. These ignorant investors were normally triggered by their greed unknowingly. When they placed their bets, the index has reached its heigth and made a correction. Many of these rush in buyers were burned alive. This kind of story will never run out in the market place whenever something is on the hot sale. It will be repeated throughout human history because of greed.
7. Part time bread earner ~ There are also those who find lives getting difficult with rising inflation. They get involve with stock market thinking to earn side income. Stock market is best suited for long term investors most of the time. Short term hoppers will sometimes make it, sometimes not. This approach is best substituted with casino.
It takes long term commitment and lifelong learning process to make a successful investment career. Though investment look easy, just buy low and sell high. Profit will be the reward. But there are much more complication in the process. There are human psychology, market volatility, speculative buying and selling behaviors, political influence and economic cycle etc. These are some of the essential factors that make it difficult for investor to practice simply buy low and sell high. It takes more to educate oneself if anyone wants to profit from the market. As such, part time practitioners can be easily dropped out in the race.
Lessons for Fund Investor
While the above descriptions apply mostly in stock market. It can be true to fund investor in most of the cases. Fund investors have to realize that market trend is the key to provide profit. Whoever come into investment lately, do not need to feel disheartened because of losing their investment. Because markets are very volatile lately. Some markets ran sideway, and some even turned bearish. If you have been losing lately, please take courage, it is only part of the parcel of learning the process. Your key lesson now is to protect yourself from losing big.
If you have earned some big profit, please do not feel that you have found “the best way” of investment as well. This is particularly true for those who have come in during the bull market in 2017. It is now the lesson to learn how you can protect your profit without being taken back by the market. Please remember the motto as “Learn before you earn!”
More will be written in this aspect for investment psychology in my next future blogs. This is the beginning of a series of investment psychology for future blogging. Please stay tune and if you have not subscribed to this blog, please sign up for immediate notice whenever new blog is released.
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