Major reasons Behind any Investment Failures

Article written by Sherin Dev. Follow me on Twitter

Did you ever taste an investment failure? Whether you have lost small or big money, failure is still a failure. Of course, you have a wonderful lesson to learn from that, to avoid the mistake again in your investment life. But, I am sure, one of the below point could be the reason for most of the investment failures happening today including yours. Understand each of these reasons to not make the mistake again and again.

1. Urge to Rich Fast

One of the deadliest, most common error happens today. In my experience, people who are in the IT community are the major victim to this error. Urge to make fast money lead them to the stock market to start trading. Recall my wordings from number of previous articles, trading cannot consider as investing but, it's just like gambling or buying a lottery ticket. People who really don't know what meant by the word 'investing' are the prey of this error. Story of other people who made money from trading activities is the major stimulating reason pupil with no investment experience approaching to the stock market to trade with an intention of being rich fast.

2. Following others

Whether he is a successful investor or a trader who makes money, following them certainly lead people to a total lose. Successful investors might have spend lots of time and they have enough money to cover once any lose happens. Following them would put an ordinary investor to the deep well with no ladder to come out. Instead of blindly following successful investors, understand their practices and stories to know more about them and accept the good points and throw out all the practices that are not relevant to you. There are lots of people in our community who may trade or invest. Some of them always happy to share their success stories to others but, never their failures! Those who hear such success stories, generally get a tendency to start trading. Another kind of beginners they believe tracking the action of big investors and invest on the stocks what they bought will make them too super rich. It is just a myth. There is no investor in the world who never had any mistakes.

3. Investing on Tips and Analyst Reports

I have already told my readers about the blunter of believing tipsters or analysts’ reports to buy or sell stocks. They should consider as barking dogs in the streets and those who mind them take care of their barking only go behind them to trap. I have given a best example to understand the foolishness of believing such reports or tips by saying the sentence "Would you inform about the gold treasure to any other people once you found it in a secret place?". Analysts are just saying something and forgetting self little later. Don't be a follower of analysts and tipsters to avoid huge money lose and mistakes.

4. Over Diversification and Less Diversification

Over diversified portfolio generally found created having number of stocks but invested less money on each. Over diversified portfolio seldom get a chance to track and monitor. This could later cause huge investment failures. Less diversified portfolio generally betting on some particular sectors and once the sector start a down turn, your invested money will be in water. Right portfolio creation and diversification is an art that requires sufficient knowledge through study and research.

5. Panic on stock market volatility

A good investor seldom tracks the stock market volatility. A bad investor starts their days with tracking what is happening in the market and the process go long until the day end. Micro monitoring on the activity and volatility of stock market is the symbol of panic mind and such people lose money in sure. They will make unwanted decisions by panic to lose their own money. Once invested in a business or stocks through good study and research, one not required to monitor the stock market activity because it is the nature of stock market.

6. Overconfidence

Not all but some of the investors have this biggest disadvantage - Overconfidence. Ego, ignorance and lack of knowledge are the reasons behind overconfidence and some time it may happen from the inner feelings of having sufficient money in hand once even if this investment is a failure.

Lack of investment knowledge plays major role to lose your money to a great extends. Great investors never invest to anywhere at the first sight but they would learn about the advantages and possible disadvantages of such investments. They would do their own researches which may sometime long last years, before make any decisions to invest. Having no time is the major culprit among young investors to lose money to a great extend. Never make above mistakes. Teach yourself first to the maximum before starts your investing activities to become a successful investor.

Image courtesy: Mr.Thomas