Why 90% of investors lose money.

PRESENTED BY:

After working in finance for over 5 years, and hosting 1000s of hours of Spaces on Twitter, I’ve talked with 100s of investors, beginners and professionals alike.

And I always see the same 5 mistakes.

But before I get into what each of these mistakes is, a word from this week's sponsor:

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Okay, now back to our newsletter.

Here are the top 5 mistakes I see beginner investors make.

These mistakes are ultimately why 90% of new investors will lose money.

1. They don’t understand the investment

If you don’t know how a company makes money, you won’t know how it can lose money.

This adds unnecessary risk to your investment plan.

This is risk that can be avoided, but often isn’t, and why most investors are losing money.

2. They sell at the wrong time

There are only 3 reasons to sell an investment:

- You found a better opportunity

- The fundamentals changed

- You met your goal

All of these reasons have everything to do with your investment strategy.

None of these reasons have anything to do with the stock price.

The lesson? If you invest based on your analysis of a company, never sell because of the stock price.

3. They invest on emotion

Just because a stock price is falling doesn’t mean you should sell. Especially if nothing has changed about the company.

And just because a stock price is rising doesn’t mean you should buy. Especially if the business is still run by poor management and has poor financials.

Always remember, stocks are volatile in the short term, but the long term trajectory is up.

4. They want to break even

Breaking even is when you refuse to sell a stock until it returns to its original price.

When you do this, you lose money through:

- Bigger losses

- Opportunity cost

You can incur bigger losses if the stock never recovers.

And your opportunity cost increases the more your money is tied up with one investment.

5. They invest what they can’t afford to lose

There are risks to investing.

You’re never guaranteed to profit and you might even lose money.

So when you invest money you need within the next year, you could end up with less than you originally invested.

This is how your losses get locked in.

That’s all for this week’s newsletter!

Stay tuned for next week's email where I talk about 5 MORE mistakes beginner investors make.

You don’t wanna miss it.

- Wolf