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How NOT to Lose Money in the Stock Market

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					            How NOT to Lose Money in the Stock Market
                                       Like what I have said in my previous post, 95% of the
                                       people in the stock market lose money. This may
                                       sound as bad news to many but it should not be.
                                        Again a vast majority fail to recognize that there is
                                       the remaining 5% who make tons of money in the
                                       stock market. Buffett is super rich right!

                                      In the stock market you lose money when you are
                                      stressed! When prices are marching up and you
                                      already have a stock position, you are not stressed.
                                      You are making money. But when the value of your
                                      holding is falling, now you feel the stress. You now
                                      feel the pressure to sell your holding at lower prices,
                                      which translates to losing money. This pressure to
                                      sell is very very difficult to ignore. You always fear
                                      that you will lose all your money. And following that,
                                      your mind goes into overdrive. It now entertains
                                      several thoughts like "my retirement money is lost, or
                                      how can we pay for all this new stuff, or that was
suppose to be for my son's college expenses, or how can we pay for the house
mortgage"...The pressure, the stress, I'm telling you, will be unbearable. You will likely have
emotional selling at low prices. Because these thoughts will not let you have a good night
sleep.

So how do you avoid this Emotional Selling and NOT lose money in the stock market?
Again, you lose money when you are stressed. Therefore, avoid stress altogether.
This is done by investing ONLY what you can afford to set aside for 5 years. This means
you should first have a BUFFER FUND or some call it an EMERGENCY FUND, before you
do ANY investing in the stock market. You do not put in ALL your retirement pay, your
college fund for your son if he is going to college next year, all your savings, or worse
borrowed money.

So, if for example the stock you bought did not go up in price as you expected and its price
even dipped, you do not feel pressured to sell at low prices (and lose money) because you
have available cash or liquid assets on hand. And as you know prices in the stock market
eventually go up. In the long term you will make money in the stock market.

The common mistake of a vast majority of people entering the stock market is that they
want to make money fast. This mind set will do the opposite! The mental need to see your
holdings   go    up      in   the     short      term     will   give    you     trouble.

Therefore, buy stock with the mindset that you are ready to leave it there for 5 years.This is
the better mindset. You might even be pleasantly surprised how big your holding stands
after 5 years.

I hope this helps investors and would be investors.
By: Jayson Flores

				
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posted:9/22/2012
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