| Why Beginners Are Unable To Generate Income In The Stock Market |
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| Written by Bernard J Dreyfus |
| Wednesday, 01 September 2010 10:23 |
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Take into consideration the very first time you got your first stock. Did you buy on the advice of an acquaintance or a broker? Did you do your homework to test whether the stock has potential for making money? Did you watch your holdings carefully to ensure the stock was behaving properly? Did you implement the proper sell rules to unload your stocks? If you ever (I'm assuming that you are a beginner in the stock markets here) answer these questions faithfully, you will be capable of finding out the reasons why you haven't been being profitable from the stock market.
Consider the very first time you acquire your first stock. Did you buy on the recommendation of an acquaintance or perhaps a broker? Did you do your homework to check whether the stock has potential for profits? Did you monitor your holdings carefully to ensure the stock was behaving properly? Did you implement the best sell rules to sell your stocks? As soon as you (I'm assuming that you are a beginner in the stock markets here) answer these questions faithfully, you will be able to find out the explanations why you haven't been making money from the stock market. Most beginners in the stock market part with their dollars using this method: they hear about a great investment opportunity of the lifetime, open up a brokerage account when possible to place their dollars at work. The minute they do that, they may buy the stock immediately, especially if ever the stock market appears to be going their way. The waiting begins as they'll watch the account and dream about retiring on a island resort someplace else using the easy cash they've earned from this profitable "investment opportunity of the lifetime". After time, the stock eventually starts to tank. "Everything is still ok" they console themselves "A little downside... it's going togo up soon". However, when the stock tanks even more and reaches to a point where the pain is too great to handle, they can not control themselves and sell off whatever stocks they have, leading to huge losses they may never be capable of recoup. In the meantime, the fund managers along with the financial institutions are making a lot of money in the markets at the beginners' expense. To people who follow brokers' buys and sells, take note! Do note that their main supply of income is to help you to purchase and sell stocks, and not to assist you to become rich. Just consider it: the more you purchase and sell shares whatever the price, the more they'll earn through the transactions they create in your behalf. The next time your broker tries to sell something to you, ask him/her whether he is also a shareholder and demand to find out some proof. I've a personal principle I live by and it is to ask anyone who tries to sell me some type of investment on whether he/she is invested in it. If not, forget it. Some analysts' recommendations are meant for those financial institutions to unload stocks to retail investors for a better price. Just imagine: An analyst recommends stock ABC which includes a buy rating a lot of times beginners rush to buy shares. Guess who sells it to them? Yes, the sellers would be the mutual funds and financial institutions who will make a tidy profit in the process. This situation can be described as common one and washes away the amauteurs who swore to stay away from the stock exchange for the remainder of their lives due to the huge losses, making way for another crop of bright-eyed, enthusiastic beginners who think they can make huge profits in the stock market. In brief, "fresh meat" for those expert traders and also the financial institutions in the stock market who await them eagerly. So how can one prevent themselves from being eaten alive in the stock market? This is summarised into one paragraph: Those who think investing or trading is similar to gambling often think of the stock market as one giant casino and get eaten alive. Conversely, individuals who treat investing or trading as a company venture have a very good much better chance of doing well after they've learned how to manage to steer with the storms of the market. In casinos, gambling is attributed to luck. In actual fact, the casinos function by way of probability; the games are planned such that the chances are with them and they will win money in the long term. The stock market on this similar in this way to casinos' business model as the percentages are against the individual investors or traders. It is important to start with the appropriate frame of mind. The mindset of the gambler (do take note we're talking about non-professional gamblers here. In actual fact, professional gamblers often take their craft as a business as well and behave as such, that's the secret of their success) is very much different to that of a business owner. In a business, you often cover all bases to ensure your your business will prosper for the long run. The primary doubt on most beginners' thoughts are this: So how must I start? The solution: Education often is the key. You have to spend time to do research and understand the several modes of investing and trading to substantiate what is best for you. Always begin with the basics of stock market systems and ensure you have a very good proper entry and exit system for purchasing and selling stocks prior to a start. Preparation is the key to success . Briefly said, beginners in the stock market often can't generate profits because they don't put in hard work required which is analogous to starting a successful business. However, it is possible to produce very good money from the stock market and many individuals have managed to do that. If they can take action, everyone can. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Bernard J Dreyfus is a highly respected stock speculator and loves to share his experiences in the stock market. Do check out the insightful articles he puts on his blog on newbies' guide to the stock market to learn about an overview of stock speculation and how to generate huge profits. A must read for all newbies interested to know what the experts will never divulge to you! |