Why do people lose money in the equity market? Well there are many and I have written a lot about this…so a few more:

1. I have seen people take contrarian positions while doing a trade: for e.g. going long on Tata Motors and going short on Tata Steel. The reason? hoping that one of them will be right. This is funny because unless there is some very specific reason for taking such a view such pair trades normally hurt. So this guy who is a TRADER, calls himself an Investor and gets the community a poor name.

2. You have very strong political views and you will be bullish because NDA is in power and you are a BJP supporter: this is bullshit, but true.

3. Your expenses increase 2x your increments. Then there is a leverage asset buying spree also !! So money does not stay with you

4. Your SIP amount assumed that equity will give 18% return, so far your return has been 12%….but you are hoping for a reversion to the mean

5. You are sure that the market will turn around so you are doing SIPs more aggressively. God bless you.

6. You knew of course nothing would happen to you because you are generally healthy. However in one of your trips to London, the walk from the station to the taxi stand had too much of snow and it took a toll of your leg…

many many more….

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  1. There is also over confidence that certain stocks will always make money and hence keep balancing the stocks. Thereby leading to huge losses.
    One need to have a lot of confidence to book losses and accept the mistakes

  2. Hope as they say is not a strategy ! Lynch mentions this nicely. The full cycle being despise stocks, look but ignore, buy and finally recommend others to buy 🙂

  3. >>You are sure that the market will turn around so you are doing SIPs more aggressively. God bless you.

    Not sure i understand this. If one is willing to hold for a period of 7 years, i do not see a problem with this. If he is not willing to hold on for such a long period, the problem is not with the SIP. It is with the holding period.

  4. In #5, ‘aggression’ with SIP is incorrect because of overconfidence ‘markets will turn around’. No place for emotions in MDSBC* 🙂

  5. Yes, I too did not understand this point alone. Can you please explain?

    “You are sure that the market will turn around so you are doing SIPs more aggressively. God bless you”

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