Why People Lose Money In The Stock Market?

If you??™ve never purchased stocks before, doing so for the first time can be a frightening thing. Tales of the stock market crash that led to the Great Depression, the tumultuous up and down nature of the market, and stories of people who lost their life savings investing in companies that went belly-up soon after are enough to whiten the hair of a first time investor and turn the bravest of the brave into an incontinent, drooling mess.

A common mistake that many people make when investing in stocks is one of simple ignorance and a demonstration of lemming-like herd mentality. When a particular stock starts to show a rising trend, many people start buying it, assuming that the stock will continue to rise and they will ???get rich quick.??? The laws of supply and demand dictate the prices in the stock market, so when many people are buying, the price does, in fact, go up. This causes many of the early birds to sell. They make some money, but the sudden change in climate from buying to selling makes people panic and they too sell, fearful that the bottom will drop out and they??™ll be left with worthless stock. These people often wind up selling in desperation for less than what they paid. The ???buy low, sell high??? mantra has gone out the window for them and they lose money.

Let it Ride

Part of the problem is that too many people look at the stock market as a short term investment. While it??™s true that if you??™re lucky enough to get in at the beginning of a Microsoft, a Yahoo, an Ebay, or a Coca-Cola, you can make a great deal of money very quickly. You stand as good a chance of hitting a progressive jackpot in Las Vegas. Instead, when choosing a stock to invest in, consider it a long term investment. Listen to the advice of your broker and select a company that isn??™t likely to bottom out anytime soon. Pay attention to what your stock is doing, but don??™t suffer heart palpitations every time it drops in price. If there are severe signs of danger, your broker will let you know. Then, if the stock does suddenly jump considerably in price, you can consider selling at a nice profit and investing elsewhere. If not, you??™ve got a solid investment in your future.