In the past 7 years the Sensex has not really gone anywhere! You could not have believed it in 2007 if I had told you

“Well the Sensex is at 21,000 and it will remain here for the next 7 years”. Well I would have been right at least till the 8th of Feb….not sure whether it will be true for 8th Feb 2015!!

Why and how do ‘investors’ lose money in equities? Simply because the media calls all of us as Investors! This is not true – they have to make a distinction between Investors, Savers and Traders. Hmmm…read on why the ‘investors’ lose money in equities!!

There are too many reasons why “investors” lose money in equities. Here I am trying to enumerate some of them. Keep visiting this post because as I get more points I will add them here rather than create a new post.

1. Confusing between trading and investing: Traders and investors both make money if done professionally. However most retail investors do not know whether they are traders, investors or speculators. So if they lose money in a trade they do make the same mistake again, and again. Professionals learn better than retail investors.

2. No asset allocation: Normally they have never enumerated all their assets and liabilities. There is an easy way to do it today – just go to valueresearchonline.com, or moneycontrol, or myirisplus…….and start tracking your portfolio, NOW.

3. No portfolio construction knowledge: Just buying a few shares is not a portfolio. I recently came across a person (he considers himself successful as an investor) who had put all his equity portfolio (40% of his net-worth)  in  2 companies  (both of the same group).  I was aghast  at his portfolio, but  as he had made  a lot of money, he thinks it  is the best strategy.

4. Not doing enough research: In your whole life you need to pick and hold about 50-60 companies. However to reach this figure you may have to look at say 500-1000 companies. If you are assuming an investing life of 40 years, looking at 1-2 companies a month is not difficult. Most retail investors are too lazy to do it.

5. Watching TV: watching television is not a bad idea. Problem is when you listen to the sound bytes, believing it and acting on it. Do not think of business channels as your “financial guru”. They are not. They are here for entertainment.

6. The money that an investor makes (or loses) is a function of market behaviour and investor behavior. Markets are far, far easier to predict. Investor behavior is impossible to predict. Most investors cannot put a rationale to their own action, once the action is over.

let me add some more later on,,,,,,but you must read this

http://www.fool.com/investing/general/2013/05/30/why-you-never-learn-from-your-investment-mistakes.aspx

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  1. The stock, bond, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

    The markets continue to rise till all short positions in the market are covered and the majority of traders move to the long side. Once this is done the market falls till all long positions are closed and short positions undertaken. Then rinse and repeat. The price mechanism has little to do with the actual demand, supply, fundamentals or state of the economy.

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